Finding 579610 (2023-002)

2023-002 - Expenditure Controls - Significant Deficiency 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: During our sample testing of 34 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 11 of 34 transactions tested, did not have pre-authorized purchase order approval, prior to the charge. 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.