GREAT HEARTS AMERICA - TEXAS

Finding #2025-002 – Allowable Costs – Significant Deficiency. Applicable federal program: U. S. Department of Education, Supporting Effective Instruction State Grants, Assistance Listing #: 84.367A, Contract #’s: S367A230041 and S367A240041. Criteria: Same as finding #2025-001. Condition and context: Same as finding #2025-001. Cause: Same as finding #2025-001. Effect: Same as finding #2025-001. Recommendation: Same as finding #2025-001. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2024-003 – Allowable Costs - Significant Deficiency. Applicable federal programs: U. S. Department of Agriculture, Passed through Texas Department of Agriculture: School Breakfast Program, AL#10.553, Contract #’s: 202423N109946 and 202120N19946, National School Lunch Program, AL#10.555, Contract #’s: 202423N109946 and 202222N109946, U. S. Department of Education, Passed through Texas Education Agency: Special Education Grants to States, AL#84.027A, Contract #: H027A230008. Criteria: Same as finding #2024-001. Condition and context: Same as finding #2024-001. The invoice was charged to the Foundation School Program. Cause: Same as finding #2024-001. Questioned costs: $0. Effect: Failure to have an effective system of internal control over non-payroll disbursements resulted in an unauthorized payment and could result in overbilling grant programs. Recommendation: Same as finding #2024-001. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2024-004 – Reporting - Significant Deficiency. Applicable federal programs: U. S. Department of Agriculture, Passed through Texas Department of Agriculture: School Breakfast Program, AL#10.553, Contract #’s: 202423N109946 and 202120N19946, National School Lunch Program, AL#10.555, Contract #’s: 202423N109946 and 202222N109946, U. S. Department of Education, Passed through Texas Education Agency: Special Education Grants to States, AL#84.027A, Contract #: H027A230008. Criteria: Same as finding #2024-002. Condition and context: Same as finding #2024-002. Repeat of finding #2023-001. Cause: Same as finding #2024-002. Effect: Failure to have an effective system of internal control over financial reporting may result in inaccurate billings to federal programs. Recommendation: Same as finding #2024-002. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2024-005 – Reporting – Significant Deficiency and Other Noncompliance. Applicable federal programs: All programs. Criteria: Schedule of Expenditures of Federal Awards – In accordance with the Uniform Guidance §200.508 and §200.510, management is to prepare a schedule of expenditures of federal wards (SEFA) for the period covered by the auditee’s financial statements which must include the total federal awards expended. Condition and context: The School did not include the Student Support and Academic Enrichment Program on the SEFA for fiscal year 2024 and had not performed a reconciliation of federal expenditures to federal program revenue. In our testing of the review and approval of the federal grant billings for the Child Nutrition Cluster and the Special Education Cluster there was no evidence of review and approval of the request for payment from a person independent of the preparation process and as a result of the failure to reconcile revenue to expenses an overbilling of the Special Education Cluster of approximately $19,000 was identified. The School has mitigating controls through a formalized review of the budget to actual for the month and year-to-date by campus and major departments. Significant variances are investigated by the Financial Analyst and the Headmasters or Department Heads. Cause: The School failed to have procedures in place to identify and reflect all federal grants on the SEFA, have timely procedures to reconcile the federal expenditures to the federal program revenue, and have an independent review of grant billing. Effect: A federal program with approximately $55,000 of expenditures was omitted from the SEFA and the revenue for the Special Education Cluster was overstated by approximately $19,000. Recommendation: Develop policies and procedures to identify and reflect all federal programs on the SEFA, reconcile the federal expenditures to the federal program revenue on a routine basis, and formalize the independent review process for the SEFA and grant billings. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2024-006 – Allowable Costs – Significant Deficiency and Other Noncompliance. Applicable federal program: U. S. Department of Education, Passed through Texas Education Agency: Special Education Grants to States, AL#84.027A, Contract #: H027A230008. Criteria: In accordance with the Compliance Supplement a local education agency can only use federal funds under IDEA, Part B for the excess costs of providing special education and related services to children with disabilities. Condition and context: During our testing of 40 disbursements totaling $83,514, 1 disbursement of $551.34 for reading books not specific to special education was erroneously charged to the program. Cause: The employee responsible for coding did not follow the allowable costs guidance for the program. Effect: An unallowable cost was charged to the program. Recommendation: Provide additional training to employees on coding and the determination of allowable costs. Views of responsible officials and

Finding #2023-002 – Significant Deficiency and Other Noncompliance. Applicable federal program: U. S. Department of Education, Passed through Texas Education Agency, Title I Grants to Local Educational Agencies, Assistance Listing # 84.010, Contract Number: S010A220043 and S010A210043. Criteria: In accordance with the Texas Administrative Code Title 19, Part 2, Chapter 100, Subchapter AA, Division 6, Rule 100.1212, special education teachers must be certified in the fields that they are assigned to teach as required by state and/or federal law. Great Hearts America – Texas should maintain the certification documentation of teachers charged to the Title I Grants to Local Educational Agencies programs to evidence compliance with this standard. Condition and context: During our testing of documentation of teacher certificates for the 17 people charged to the program, a copy of teacher certificates for 4 teachers was not available for review. Cause: Great Hearts America – Texas did not follow its policies and procedures for retention of documentary evidence of teacher certification. Effect: Failure to adequately establish and maintain effective internal controls over the retention of teacher certificates could result in noncompliance. Recommendation: Reemphasize the need to adhere with policies and procedures to ensure retention of documentary evidence of teacher certifications. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.