Finding Text
Condition
Two employees were paid wages for activities coded to special education:
For one of the two special education employees tested, Ha:San prepared an employment
contract, however, they were not signed by the employee or a school administrator.
For the other employee tested, Ha:San could not provide evidence it prepared or retained an
employment contract to support the employee designation to provide special education
services.
For all seven timecards tested for both employees the timecards did not contain a signature
from either the employee or a School administrator.
Criteria
Accounting best practices specifies that supporting documentation should be prepared and
retained to support all transactions.
The Internal Revenue Service explains "An exempt organization must keep books and records
needed to show that it complies with the tax rules. The organization must be able to document
the sources of receipts and expenditures reported on its annual return and on any tax returns it
must file. Records must support income, expenses, and credits reported on exempt
organization annual returns and tax returns."
Uniform Guidance §200.333 Retention requirements for records states in part: "Financial
records, supporting documents, statistical records, and all other non-Federal entity records
pertinent to a Federal award must be retained for a period of three years from the date of
submission of the final expenditure report..."must be based on records that accurately reflect the work performed. These records must: (i)
Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated.
2 CFR 200.430(i)(1)(vii) states: "Support the distribution of the employee’s salary or wages
among specific activities or cost objectives if the employee works on more than one Federal
award; a Federal award and non-Federal award; an indirect cost activity and a direct cost
activity; two or more indirect activities which are located using different allocation bases; or an
unallowable activity and a direct or indirect cost activity."
Cause
There was a period of significant turnover in the administrative office for the past year. During
the transition, existing controls were not followed to ensure complete documentation was
retained.
Effect
Financial information Ha:San uses to make decisions and reports provided to the state of
Arizona for oversight could have been materially misstated throughout the fiscal year. Further,
Ha:San could end up being in noncompliance with federal and state laws.
Recommendation
Ha:San should procure a consultant or modify the organizational chart of the finance office to
ensure individuals with the skills, knowledge and expertise prepare, review and retain required
source documentation.