Finding 528830 (2024-001)

Material Weakness Repeat Finding
Requirement
ABH
Questioned Costs
-
Year
2024
Accepted
2025-03-19
Audit: 346886
Organization: Lukachukai Community School (AZ)

AI Summary

  • Core Issue: The School failed to follow its own policies for financial disbursements, leading to noncompliance with federal regulations.
  • Impacted Requirements: Internal controls over travel reimbursements, credit card transactions, and disbursements were inadequate, resulting in errors and potential overpayments.
  • Recommended Follow-Up: The School should enhance adherence to policies, ensure staff training on procedures, and implement controls to maintain compliance despite personnel changes.

Finding Text

Finding Number: 2024‐001 Repeat Finding: Yes, 2023‐001 Program Names/Assistance Listing Titles: Assistance Listing Numbers: Federal Award Numbers: Questioned Costs: Indian School Equalization 15.042 A23AV00864 N/A Title I Grants to Local Educational Agencies 84.010 A23AV00864 N/A Federal Agency(ies): U.S. Department of the Interior; U.S. Department of Education Pass‐Through Agency: Bureau of Indian Education Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Criteria School management is responsible for establishing and maintaining internal controls over travel reimbursements, credit card transactions, journal entries, and disbursements that are adequate to ensure that all financial activities are properly processed and recorded. Further, Indian tribes and tribal organizations, may without the approval of the BIA, expend funds provided under a selfdetermination contract for purposes identified in 25 USC 5325, to the extent that the expenditure of the funds is supportive of a contracted program (25 USC 5325). These guidelines require internal controls over expenditures of federal monies to ensure expenditures comply with federal regulations and guidelines. (25 CFR 39; 25 CFR 900). Condition The School did not follow its Board adopted policies regarding disbursements to ensure all financial activities were properly processed. Cause The School has not implemented sufficient controls over disbursement transactions. There has been turnover in various key positions. Effect The School was not in compliance with Board adopted policies for federal regulations and guidelines. Context The sample was not intended to be, and was not, a statistically valid sample. During our review of disbursement transactions, we noted the following: • For one of 10 travel reimbursements reviewed, the School did not maintain supporting documents. • For four of 10 travel reimbursements reviewed, the School did not reimburse the expense using the correct rates established by GSA, resulting in a net overpayment of $152. Context • For one of 10 travel reimbursements reviewed, meals were reimbursed with no overnight stay or substantial sleep/rest, and the reimbursement was not reported as a taxable employee benefit. • For seven of 40 disbursements reviewed, no dated receiving report was retained; therefore, we were unable to determine if the School paid goods before they were received. Additionally, we were unable to agree the description and quantity to the purchase order. • For 12 of 40 disbursements reviewed, the School ordered and received goods/services before a purchase order was in place. • For two of 40 disbursements reviewed, the expenditures exceed the authorized purchase order amounts, resulting in total exceeded costs of $151. • For one of 40 disbursements reviewed, the goods were received after the payment was made to vendor. • The School does not have a signed credit card user agreements that acknowledges the receipt of the School credit card use policies and procedures. • For one of 15 credit card transactions reviewed, documentation to verify the receipt of the prepaid item was not maintained. • Credit card statements were not always paid timely, resulting in late fees of $2,086 and finance charges of $2,317. • For one cutoff transaction tested, it was determined that the expenditure should have been assessed as Construction‐in‐Process and tracked with the capital asset listing. The School did not track how much of the project had been completed at year‐end. • For one of 25 journal entries reviewed, the School did not maintain sufficient supporting documentation. • For one of five cutoff transactions reviewed, it was determined that the expenditure should have been paid in the current fiscal year instead of the subsequent fiscal year. • For one of five credit card purchases reviewed, there was no receipt retained. • For 15 of 25 journal entries reviewed, the journal entry was not approved by someone other than the preparer. • For one of 40 disbursements reviewed, the purchase requisition was dated after the purchase and no purchase order was provided. • The School did not properly close out 13 open purchase orders. Recommendation The School should improve and adhere to its Board adopted policies and federal regulations. The School should ensure multiple employees understand the policies and procedures, so they can continue if there is turnover. Views of Responsible Officials

Corrective Action Plan

Program Name/Assistance Listing Title: Indian School Equalization Assistance Listing Number: 15.042 Contact Persons: Carmen Jodie, Principal; Patrice Henderson, Business Manager Anticipated Completion Date: June 30, 2025 Planned Corrective Action: The School previously experienced a high turnover rate in the Business Office and Administration. The School had a Principal and Acting Principals throughout School Year 2023‐ 24. The business office has obtained outside consulting services to assist in reconciliation and financial processes. The business office will continue to work with other departments in making sure they submit documentation accurately and timely. The business office will continue to work on improving the following areas: travel reimbursement, receiving reports, timely payment of bills, payment of goods, journal entries, purchase orders; per the findings listed. A Credit Card User Agreement form will be developed to support the school’s Credit Card Policies and Procedures.

Categories

Allowable Costs / Cost Principles Procurement, Suspension & Debarment Cash Management Material Weakness

Other Findings in this Audit

  • 528831 2024-002
    Significant Deficiency
  • 528832 2024-003
    Significant Deficiency Repeat
  • 528833 2024-001
    Material Weakness Repeat
  • 528834 2024-002
    Significant Deficiency
  • 1105272 2024-001
    Material Weakness Repeat
  • 1105273 2024-002
    Significant Deficiency
  • 1105274 2024-003
    Significant Deficiency Repeat
  • 1105275 2024-001
    Material Weakness Repeat
  • 1105276 2024-002
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
15.042 Indian School Equalization $4.00M
15.047 Indian Education Facilities, Operations, and Maintenance $1.29M
84.425 Education Stabilization Fund $1.03M
15.046 Administrative Cost Grants for Indian Schools $948,899
84.010 Title I Grants to Local Educational Agencies $876,548
15.062 Replacement and Repair of Indian Schools $515,994
15.044 Indian Schools Student Transportation $380,922
84.027 Special Education Grants to States $363,129
84.336 Teacher Quality Partnership Grants $119,796
10.555 National School Lunch Program $44,518
10.553 School Breakfast Program $22,051
84.358 Rural Education $2,850
84.424 Student Support and Academic Enrichment Program $2,100