Finding 398486 (2023-001)

Material Weakness Repeat Finding
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2024-05-24
Audit: 307206
Organization: Crazy Horse School (SD)

AI Summary

  • Core Issue: The School has faced ongoing financial challenges, including a deficit of $269,778 in the general fund as of June 30, 2023, due to past over-expenditures and bad debts.
  • Impacted Requirements: The School's failure to monitor budgets and payroll tax responsibilities has led to penalties and a repeat finding from the previous year.
  • Recommended Follow-Up: The School should focus on generating income in the general fund, liquidate remaining debts, and enhance budget oversight to prevent future issues.

Finding Text

Criteria: The School operates its education programs with grants from the federal and state government. Any advanced grant funds held by the School must be kept intact and in allowable cash accounts. Condition: In prior years, the School incurred over-expenditures in their federal funds requiring support entries to be made from the general fund. The general fund did not have the available net assets to cover these costs and as such has reported deficits in their unrestricted net assets for the prior three years. They did incur a deficit of $5,724 in the current year as they wrote off all remaining bad debts of a loan program also started in 2019. The remaining deficit in the general fund is $269,778 at June 30, 2023. Context: In the prior years the School was forced to obtain debt to help fund these over-expenditures. They also had quit making their payroll tax deposits during FY2019 as well, due to the cash flow issues. This all created a situation that the School is still dealing with. The only recourse to correct this situation is to generate income in their general fund to create positive fund balance. They have cleared all debt with the Internal Revenue Service and have a remaining balance on their cash flow loan of only $13,774. Questioned Costs: None noted. Cause: Lack of oversight and monitoring of budget and their payroll tax responsibilities in prior years resulted in significant penalties and interest charges by the Internal Revenue Service for late payments and late filings as well as the over-expenditures. The institution of an employee loan fund also added to the problem as procedures established over the loan fund by the board were not followed and there were significant bad debts incurred in 2019 and 2020. Effect: The School has spent the last three years paying off the debts incurred in prior years. They continued to carry one operating loan at year end with a balance of $13,774 for which they are making monthly payments from their general fund. The School did not have revenue in excess of expenditures in the general funds in the current year due to the bad debt write offs of $7,129 of the remaining bad loans. Identification of Prior Audit Finding: This finding is a repeat of a prior year finding 2022-001. Recommendation: We recommend the School continue to implement their plan to liquidate all remaining debt from the general fund and that they investigate new funding sources or maximizing their existing sources of revenue. We also recommend they continue a vigilant oversight of all budgets of the School to ensure this situation does not occur again. Views of Responsible Officials: The views of management are included in the corrective action plan beginning on page 40.

Categories

Subrecipient Monitoring Cash Management Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

  • 398482 2023-001
    Material Weakness Repeat
  • 398483 2023-002
    Significant Deficiency Repeat
  • 398484 2023-001
    Material Weakness Repeat
  • 398485 2023-002
    Significant Deficiency Repeat
  • 398487 2023-002
    Significant Deficiency Repeat
  • 398488 2023-001
    Material Weakness Repeat
  • 398489 2023-002
    Significant Deficiency Repeat
  • 398490 2023-001
    Material Weakness Repeat
  • 398491 2023-002
    Significant Deficiency Repeat
  • 974924 2023-001
    Material Weakness Repeat
  • 974925 2023-002
    Significant Deficiency Repeat
  • 974926 2023-001
    Material Weakness Repeat
  • 974927 2023-002
    Significant Deficiency Repeat
  • 974928 2023-001
    Material Weakness Repeat
  • 974929 2023-002
    Significant Deficiency Repeat
  • 974930 2023-001
    Material Weakness Repeat
  • 974931 2023-002
    Significant Deficiency Repeat
  • 974932 2023-001
    Material Weakness Repeat
  • 974933 2023-002
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
15.042 Indian School Equalization Program $2.66M
84.425 Education Stabilization Fund $1.53M
15.046 Administrative Cost Grants for Indian Schools $730,753
84.027 Special Education_grants to States $694,587
84.010 Title I Grants to Local Educational Agencies $687,188
15.047 Indian Education Facilities, Operations, and Maintenance $621,043
15.044 Indian Schools_student Transportation $548,116
93.243 Substance Abuse and Mental Health Services_projects of Regional and National Significance $362,716
84.299 Indian Education -- Special Programs for Indian Children $172,202
10.555 National School Lunch Program $128,078
84.336 Teacher Quality Partnership Grants $68,242
15.151 Education Program Enhancements $62,625
84.060 Indian Education_grants to Local Educational Agencies $60,398
10.553 School Breakfast Program $37,564
84.424 Student Support and Academic Enrichment Program $9,583
10.582 Fresh Fruit and Vegetable Program $6,243
10.565 Commodity Supplemental Food Program $2,140
84.369 Grants for State Assessments and Related Activities $537
84.358 Rural Education $46