CORRECTIVE ACTION PLAN Oversight Agency for Audit: U.S. Department of Education The City of Haverhill, Massachusetts respectfully submits the following corrective action plan for the year ended June 30, 2022. Name and address of independent public accounting firm: Powers & Sullivan, LLC 100 Quannapowitt Parkway, Suite 101 Wakefield, MA 01880 Audit period: July 1, 2021 through June 30, 2022 The finding from the June 30, 2022, schedule of findings and questioned costs is discussed below. The finding is numbered consistently with the number assigned in the schedule. FINDINGS?FEDERAL AWARD PROGRAMS AUDITS U.S. DEPARTMENT OF EDUCATION Passed through the Massachusetts Department of Elementary and Secondary Education Education Stabilization Fund Education Stabilization Fund Federal Assistance Listing No. 84.425C, 84.425D, and 84.425W 2022-002: Controls for Charging Expenditures to the Grant Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Compliance and Internal Control over Compliance ? Other Matter Criteria or Specific Requirement: Grantees must provide reasonable assurance that Federal awards are expended only for allowable activities and that the costs of goods and services charged to Federal awards are allowable and in accordance with the applicable cost principles. Condition: The City did not have an adequate process to charge expenditures to the Education Stabilization Fund program, resulting in large adjusting journal entries to record costs to the grant. The City also did not have an adequate process to maintain supporting documentation for the adjusting entries in an efficient manner that could be provided timely upon request. Questioned Costs: None reported. Context: A majority of expenditures were initially charged to the general fund upon disbursement and subsequently reclassified to the Education Stabilization Fund program via three material manual adjusting journal entries. The City was not able to provide documentation to support the manual journal entries upon request, and support was not provided until a significant amount of time after the request was made. Effect: The City is not able to promptly substantiate the allowability of costs charged to the Federal program. The risk that unallowable costs could be charged, or that accounting errors could be made and not detected and correct timely, is heightened. Cause: Lack of appropriate controls over recording expenditures to the grant and maintaining documentation for costs charged. The internal control process should include procedures to ensure that grant activity is recorded appropriately, and that adequate supporting documentation is maintained and readily available. Recommendation: Management should implement internal control procedures to ensure that expenditures are charged appropriately at the time they are initially incurred. Effective internal control procedures would mitigate the need for large manual adjusting journal entries. If adjusting journal entries are required, the City should retain adequate documentation to support the journal entries. The documentation should be filed in a manner that ensures it is easily accessible upon request. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and will implement internal control procedures to ensure that expenditures are recorded appropriately at the time they are incurred. Management will also implement procedures to ensure that, if manual adjusting entries are required, detailed supporting documentation is maintained. Management plans to implement these procedures in 2023. If the Oversight Agency has questions regarding this plan, please call Michael Pfifferling, Assistant Superintendent of Finance and Operations at 978-374-3400. Sincerely yours, Michael Pfifferling Assistant Superintendent of Finance and Operations City of Haverhill