Heber-Overgaard Unified School District No. 6

Finding Number: 2025‐001 Repeat Finding: No Program Names/Assistance Listing Titles: Assistance Listing Numbers: Federal Award Numbers: Questioned Costs: Title I Grants to Local Educational Agencies 84.010 S010A240003 N/A Forest Service Schools and Roads Cluster 10.665 N/A N/A Federal Agencies: U.S. Department of Education, U.S. Department of Agriculture Pass‐Through Agencies: Arizona Department of Education, Navajo County Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Allowable Costs/Cost Principles Criteria Management is responsible for establishing and maintaining internal controls over payroll. In addition under 2 CFR 200.430, management is responsible for maintaining documentation to support all salary and wage payments to employees. Condition The District lacked proper internal controls over payroll including maintaining adequate supporting documentation. Cause The District did not establish adequate controls over the processing of payroll expenses. Effect The District could not adequately support payments for employee payroll expenses. Context During our review of payroll, we noted the following:  For three of 50 payroll records reviewed, employee pay could not be recalculated.  For four of 50 payroll records reviewed, the employee's contract salary could not be agreed to the annual distribution report, resulting in a net overpayment of $2,101.  For two of 50 payroll records reviewed, time and effort documentation was not maintained.  For four of 50 payroll records reviewed, the timesheet was not signed by the supervisor, employee, or both to indicate approval.  For five of 50 payroll records reviewed, the District was unable to provide supporting documentation for election of prorated compensation.  For 11 of 50 payroll records reviewed, the Governing Board approval of the employee contract was not provided. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The District should enhance its internal control procedures over payroll to ensure that all employee payroll expenses are correct and supported. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2024‐001 Repeat Finding: No Program Name/Assistance Listing Title: Forest Service School and Roads Cluster, Education Stabilization Fund Assistance Listing Number: 10.665, 84.425 Federal Agency: U.S. Department of Education Federal Award Number: S425U210038 Pass‐Through Agency: Navajo County, Arizona Department of Education Questioned Costs: N/A Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Reporting Criteria Education Stabilization Fund grantees must submit an annual performance report with data on expenditures, planned expenditures, subrecipients, and uses of funds, including for mandatory reservations. LEAs/subrecipients submit data to the SEA/Governor for the SEA/Governor’s report. Annual reports are due each spring for the previous reporting period. In addition, in accordance with 2 CFR 200.512, the single audit must be completed, and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period. Condition District policies and procedures related to federal requirements were not always followed. Cause The District’s internal controls and procedures were not always followed to ensure that all applicable reports were timely and properly prepared. Lack of management oversight contributed to the deficiency. Effect The District was not in compliance with federal requirements related to reporting and other federal regulations and guidelines. Context The District did not properly prepare the LEA Uses of ESSER I, II, & III – Use of Funds Detail report as required by the Arizona Department of Education. The District could not provide support to for the amount of expenditures and number of Education Stabilization Fund funded positions In addition, the District’s Single Audit Report was not completed and submitted within nine months of fiscal yearend. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The District should ensure that all special reports that are submitted to the Arizona Department of Education are properly prepared, and that adequate supporting documentation is maintained. In addition, The District should implement better controls over financial reporting and records retention to ensure all documents are prepared and available for the timely completion of the financial and single audit reports. Views of Responsible Officials See Corrective Action Plan.