ISAAC ELEMENTARY DISTRICT NO. 5

2025-004: FEDERAL PROCUREMENT PROCEDURES Program: Child Nutrition Cluster Federal Assistance Listing Number: 10.553, 10.555, 10.559 Federal Agency: U.S. Department of Agriculture Pass-Through Agency: Arizona Department of Education Grantor Number: ADE ED09-0001 Questioned Costs: $-0- Type of Finding: Noncompliance (Other Matter), significant deficiency in internal control Compliance Requirement: I. Procurement, Suspension, and Debarment

Condition: During testing of procurement activities within the Child Nutrition Cluster, we selected three purchases for review. For all three purchases tested, the District did not perform and document the procurement procedures required under federal regulations to obtain written price quotations. Specifically, the District was unable to provide evidence demonstrating that applicable procurement requirements, including obtaining and documenting competition as required by federal procurement standards, were followed prior to making the purchases.

Criteria or Specific Requirement: Title 2 CFR §200.318 through §200.327 requires non-federal entities expending federal awards to establish and follow documented procurement procedures that reflect applicable federal, state, and local laws and regulations. These procedures must ensure full and open competition and maintain sufficient records to detail the history of the procurement, including the rationale for the method of procurement, contractor selection, and the basis for contract pricing.

Cause: District personnel responsible for procurement and federal program administration did not consistently apply and document procurement procedures for purchases charged to the Child Nutrition Cluster. The District did not maintain documentation to support that three written quotes were maintained to support the purchases or that other applicable methods of procurement were utilized (cooperative purchases, RFPs, etc.) Additionally, management's monitoring controls were not sufficient to ensure compliance with federal procurement requirements prior to the expenditure of federal funds.

Effect: Failure to follow and document required procurement procedures increases the risk that purchases may not be made in accordance with federal requirements, potentially limiting competition and resulting in questioned costs, repayment of federal funds, or other sanctions from grantor agencies.

Repeat Finding: No.

Recommendation: We recommend the District strengthen internal controls over procurement compliance by implementing procedures to ensure all purchases made with federal funds are reviewed for compliance with applicable procurement requirements before purchases are finalized, maintaining documentation supporting the procurement method utilized, solicitation of bids or quotes when required, vendor selection, and price determination.

Views of Responsible Officials: The District concurs with this recommendation. See the corrective action plan in a separately published document.

2025-005: REPORTING Program: Child Nutrition Cluster Federal Assistance Listing Number: 10.553, 10.555, 10.559 Federal Agency: U.S. Department of Agriculture Pass-Through Agency: Arizona Department of Education Grantor Number: ADE ED09-0001 Questioned Costs: $-0- Type of Finding: Noncompliance (Other Matter), significant deficiency in internal control Compliance Requirement: L. Reporting

Condition/Context: During our review of meals claims submitted for reimbursement, we noted variances between the District’s meal counts and what was submitted to the Arizona Department of Education. For four months tested, meals claims were net under-reported by 10,403 lunch and breakfast meals, which calculated to $3,616.29. Additionally, for three of 4 months tested, the District did not maintain any documentation to support that the claims were reviewed by a second person.

Criteria: Child Nutrition Cluster claim forms should be supported by documentation showing the number of meals for which reimbursement was requested. This documentation should be maintained to support what was requested for reimbursement by ADE.

Cause: Management oversight.

Effect: Without proper controls over applications and the filing of claims, the District could over or under claim their reimbursements from the Child Nutrition Program without detecting the error.

Repeat Finding: No.

Recommendation: We recommend the District have a second employee verify and approve all NSLP Claim forms to ensure the claims submitted are accurate and complete prior to submission.

Views of Responsible Officials: The District concurs with this recommendation. See the corrective action plan in a separately published document.

Finding Number: 2024‐001 Repeat Finding: Yes – 2023‐001 Program Names/Assistance Listing Titles: Assistance Listing Numbers: Federal Award Numbers: Questioned Costs: Title I Grants to Local Educational Agencies 84.010 S010A230003 $0 Education Stabilization Fund 84.425C S425D200038 $0 Education Stabilization Fund 84.425D S425D200038 $0 Education Stabilization Fund 84.425D S425D210038 $0 Education Stabilization Fund 84.425U S425U210038 $2,477 Education Stabilization Fund 84.425W S425W210003 $0 Federal Agency: U.S. Department of Education Pass‐Through Agency: Arizona Department of Education Type of Finding: Noncompliance, Material Weakness Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Criteria In accordance with 2 CFR Part 200.303, the District is responsible for establishing and maintaining 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. Condition The District did not maintain effective internal control over activities allowed or unallowed and allowable costs/cost principles for several grants. Cause The District’s grant budgets were not approved until well after the beginning of each grant’s period of performance. Additionally, the District did not verify actual spending was within approved budgets, and, therefore, did not submit for budget revisions or manage available resources in a timely or effective manner. Effect The District was not in compliance with 2 CFR Part 200.303.Context Journal entries reviewed for the Title I Grants to Local Educational Agencies program and the American Rescue Plan ‐ Elementary and Secondary School Emergency Relief (ARP ESSER) grant within the Education Stabilization Fund were to correct consistent, pervasive, and material grant overexpenditures. In particular, for ARP ESSER, the District posted 533 adjusting journal entries totaling in excess of $25.0 million during fiscal year 2023‐24 moving expenditures to and from the grant, and at times, not identifying specific underlying transactions during such movement. The volume and dollar value of the entries indicate a severe internal control deficiency this late in the lifecycle of the ARP ESSER grant. There was no consistent plan, budget, or management of the ARP ESSER monies. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The District should provide training for those with grants management responsibilities. In particular, the District should provide training on the relationship between the District’s accounting records and the State’s grants management enterprise to ensure grant budgets are not overexpended going forward. The District should also have more consistent and timely oversight of grants by higher level management. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2024‐002 Repeat Finding: Yes ‐ 2023‐002 Program Name/Assistance Listing Title: Education Stabilization Fund Assistance Listing Number: 84.425U Federal Agency: U.S. Department of Education Federal Award Number: S425U210038 Pass‐Through Agency: Arizona Department of Education Questioned Costs: N/A Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Reporting Criteria Districts that received Education Stabilization Fund funding were required by the Arizona Department of Education to complete the “LEA Uses of ESSER I, II, & III – Use of Funds Detail” report by May 10, 2024. The report was based on fiscal year 2022‐23 financial information and full‐time equivalency (FTE) information. Condition Inadequate internal controls existed over the Education Stabilization Fund reporting processes. Cause The District did not develop nor implement strong internal controls over reporting due to lack of training for individuals with reporting responsibilities. Effect The District is at risk of reporting inaccurate information. Context The District was unable to provide supporting documentation for the allocation of expenditures to the four categories listed in the report. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The District should develop or implement strong internal controls over reporting to reduce the risk of reporting inaccurate information. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2024‐003 Repeat Finding: No Program Name/Assistance Listing Title: Education Stabilization Fund Assistance Listing Number: 84.425U Federal Agency: U.S. Department of Education Federal Award Number: S425U210038 Pass‐Through Agency: Arizona Department of Education Questioned Costs: N/A Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Reporting Criteria The Arizona Department of Education (ADE) requires Districts to submit a completion report through the ADE grants management system. Completion reports are required for all grants, must be submitted to ADE within 90 days after the grant end date, and must agree to the underlying accounting records. Condition Inadequate internal controls existed over the preparation of the completion report for the American Rescue Plan ‐ Elementary and Secondary School Emergency Relief (ARP ESSER) grant within the Education Stabilization Fund. Cause The District did not develop nor implement strong internal controls over reporting due to lack of training for individuals with reporting responsibilities and lack of timely management of grant expenditures. Effect The District is at risk of reporting inaccurate information. Context The District reported $10.6 million of equipment expenditures in the completion report, which agreed in total to the accounting records. However, the detail by object code presented in the completion report did not agree to the underlying accounting records. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The District should develop or implement strong internal controls over reporting to reduce the risk of reporting inaccurate information to ADE. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐001 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 S010A220003 $48,491 Supporting Effective Instruction State Grants 84.367 S367A220049 $41,547 Student Support and Academic Enrichment Program 84.424 S424A210003 $29,979 Education Stabilization Fund 84.425C N/A $4,206 Education Stabilization Fund 84.425D S425D200038 $10,867 Education Stabilization Fund 84.425U S425U210038 $9,812,251 Federal Agency: U.S. Department of Education Pass‐Through Agency: Arizona Department of Education Type of Finding: Noncompliance, Material Weakness Compliance Requirements: Activities allowed or unallowed, Allowable costs/cost principles Criteria In accordance with 2 CFR Part 200.303, the District is responsible for the establishing and maintaining 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. Condition The District did not maintain effective internal control over activities allowed or unallowed and allowable costs/cost principles for several grants. Cause The District’s grant budgets were not approved until well after the beginning of each grant’s period of performance. Additionally, the District did not verify actual spending was within approved budgets, and, therefore, did not submit for budget revisions in a timely manner. Effect Costs were disallowed or entitlement funding was forfeited after the close of the fiscal year. Audit adjustments were necessary to properly state the grant activity on the District’s Schedule of Expenditures of Federal Awards (SEFA). Due to the manner in which the District moved expenditures, the auditors could not determine if costs moved between grants complied with relevant Federal statutes, regulations, and the terms and conditions of the Federal award.Context The District was not timely managing and revising grant agreements with the Arizona Department of Education throughout the fiscal year. As a result, material adjustment to the grant activity of four entitlement grants was posted during the completion report process in February 2024. The District moved unallowed costs in total from each grant to the American Rescue Plan ‐ Elementary and Secondary School Emergency Relief (ARP ESSER) grant without identifying specific transactions or positions to ensure allowability under the ARP ESSER grant. Activity moved en‐masse to the ARP ESSER grant was as follows:  $1,299,850 from Title I Grants to Local Educational Agencies (ALN 84.010)  $120,986 from Supporting Effective Instruction State Grants (ALN 84.367)  $41,547 from Student Support and Academic Enrichment Program (ALN 84.424)  $8,345,868 from Elementary and Secondary School Emergency Relief (ESSER) Fund (ALN 84.425D) Additionally, the District did not have controls in place to ensure costs were not charged to inactive grant funds. As a result, the following grants had transactions recorded to them that were not associated with an active grant agreement:  Title I Grants to Local Educational Agencies (ALN 84.010) ‐ $48,491  Supporting Effective Instruction State Grants (ALN 84.367) ‐ $45,152  Student Support and Academic Enrichment Program (ALN 84.424) ‐ $29,979  Elementary and Secondary School Emergency Relief (ESSER) Fund (ALN 84.425D) ‐ $10,867  Governor’s Emergency Education Relief (GEER) Fund (ALN 84.425C) ‐ $4,206 The sample was not intended to be, and was not, a statistically valid sample. Recommendation The District should provide training for those with grants management responsibilities. In particular, the District should provide training on the relationship between the District’s accounting records and the State’s grants management enterprise to ensure grant budgets are not overexpended going forward. The District should also have more consistent and timely oversight of grants by higher level management. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐002 Repeat Finding: No Program Name/Assistance Listing Title: Education Stabilization Fund Assistance Listing Number: 84.425 Federal Agency: U.S. Department of Education Federal Award Number: S425U210038 Pass‐Through Agency: Arizona Department of Education Questioned Costs: N/A Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Reporting Criteria Districts that received Education Stabilization Fund funding were required by the Arizona Department of Education to complete the “LEA Uses of ESSER I, II, & III – Use of Funds Detail” report by April 21, 2023. The report was based on fiscal year 2021‐22 financial information and full‐time equivalency (FTE) information. Condition Inadequate internal controls existed over the Education Stabilization Fund reporting processes. Cause The District did not develop nor implement strong internal controls over reporting due lack of training for individuals with reporting responsibilities. Effect The District is at risk of reporting inaccurate information. Context The District was unable to provide supporting documentation for the allocation of expenditures to the four categories listed in the report and the FTE information as of September 30, 2022. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The District should develop or implement strong internal controls over reporting to reduce the risk of reporting inaccurate information. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐003 Repeat Finding: Yes, 2022‐001 Program Name/Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Agency: U.S. Department of Education Federal Award Number: GR‐ARPA‐ASL‐ISAACSD‐161, GR‐ARPA‐SEP‐ISAACSD‐37 Pass‐Through Agency: Arizona Governor’s Office Questioned Costs: N/A Type of Finding: Material Weakness, Noncompliance Compliance Requirement: Activities allowed or unallowed, allowable costs/cost principles Criteria In accordance with 2 CFR Part 200.303, the District is responsible for the establishing and maintaining 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. Condition The District did not have adequate internal controls in place to ensure eligible expenditures for the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program were not reimbursed by other federal grants. Cause The District lacked internal controls over grants management. The District consistently had initial grant budgets approved well after the beginning of each grant’s period of performance. Additionally, the District was not reviewing actual spending to approved budgets, and, therefore, did not submit for budget revisions or reimbursements in a timely manner. Effect The District did not ensure the grant expenditures were properly reported on the Schedule of Expenditures of Federal Awards, resulting in the need for the single audit report to be reissued. Context The District requested reimbursement in early calendar year 2024 for SLFRF grant expenditures, of which $1,723,915 were recorded within the Education Stabilization Fund (ESF). Journal entries to move the expenditures to the SLFRF grant fund were not performed until early calendar year 2025. The result is that the District was reimbursed for the same costs from both the ESF and SLFRF programs. However, the District later performed journal entries, in early calendar year 2025, to move additional eligible expenditures for the ESF that replaced the expenditures reimbursed by the SLFRF program. The sample was not intended to be, and was not, a statistically valid sample.Recommendation The District should provide training for those with grants management responsibilities. In particular, the District should provide training on the relationship between the District’s accounting records and should implement controls to ensure expenditures are not submitted for reimbursement under multiple federal grants. The District should also have more consistent and timely oversight of grants by higher level management. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐004 Repeat Finding: No Program Name/Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Agency: U.S. Department of Education Federal Award Number: GR‐ARPA‐ASL‐ISAACSD‐161, GR‐ARPA‐SEP‐ISAACSD‐37 Pass‐Through Agency: Arizona Governor’s Office Questioned Costs: N/A Type of Finding: Significant Deficiency, Noncompliance Compliance Requirement: Procurement, Suspension and Debarment Criteria Non‐Federal entities are prohibited from contracting with or making sub awards under covered transactions to parties that are suspended or debarred. “Covered transactions” include those procurement contracts for goods and services awarded under a non‐procurement transaction that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR §180.220. Condition Verification of suspension and debarment documentation was not maintained for vendors with which the District spent at least $25,000 of federal grant monies. Cause The District has not implemented consistent internal controls over suspension and debarment due to turnover in the Purchasing Department. Effect The District was not in compliance with the requirements set forth by the federal government. However, it was subsequently determined that the three vendors sampled were not suspended or debarred. Context For three vendors that the District utilized for the program, the District did not document its verification of whether the vendor was suspended or debarred. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The District should follow purchasing policies and procedures established to ensure compliance with federal requirements regarding suspension and debarment.Views of Responsible Officials See Corrective Action Plan.