LEAD Charter Schools

Material Weakness in Internal Controls Over Compliance and Noncompliance: Payroll Federal program: Award Number: Federal Agency: Compliance Requirement: Questioned Costs: FAL 84.010A Title I Grants to Local Educational Agencies (Title I, Part A of the ESEA) None U.S. Department of Education Allowable Costs N/A Criteria: In accordance with 2 CFR, §200.430(i)(1) Charges to Federal awards for salaries and wages 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. Condition: For 1 out of 40 payroll transactions tested, Title I funds were being utilized for wages that did not meet the allowable cost criteria defined by the grant. Cause: The School’s control environment failed to detect and correct payroll errors in a timely manner, allowing wages for ineligible activities to be charged against the Title I program. Effect: There is an increased risk that employee compensation will be charged to grants for unallowable activities. Recommendation: To help ensure that charges to payroll expenses are accurately allocated to the grants for which they are reimbursable, the School should implement internal control policies and procedures that require regular review of employees whose work activity deviates from initial budget estimates.

REFERENCE: 2023-101 CFDA NUMBER 84.425D – COVID 19 – EDUCATION STABILIZATION FUND U.S. DEPARTMENT OF EDUCATION – 2023 PASSED THROUGH ARIZONA STATE DEPARTMENT OF EDUCATION GRANT NUMBER: S425D210038

QUESTIONED COSTS N/A

CONDITION For the only employee paid under the School Safety Grant, the two semi-annual certifications for the employee did not cover the time period for wages charged to the grant. The certifications covered the school year period of July 18, 2022 to May 26, 2023, rather than the fiscal year period of July 1, 2022 through June 30, 2023. Additionally, although the certifications were signed by a supervisor, the date of review was not documented. Alternative procedures were performed to ensure that the costs were allowable to the program.

CRITERIA In accordance with 2 CFR, Subtitle A, Chapter II, Part 200, Subpart E General Provisions for Selected Items of Cost, §200.430(i), (1) Charges to Federal awards for salaries and wages 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; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and (vii) 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 allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.

In accordance with OMB Compliance Supplement, Part 6 – Internal Control, The 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.

EFFECT Distribution of the employee's salary or wages among specific activities or cost objectives was not properly documented and did not agree actual activities incurred.

CAUSE Although internal controls were properly designed, there were deficiencies in the execution of the controls.

RECOMMENDATION AND BENEFIT Semi-annual certifications and time and effort logs, should be reviewed to ensure that the time periods spent on the federal programs support the expenditures charged to the grant. Additionally, the certifications and logs should be reviewed to ensure that they are properly signed and dated by a supervisor. This will help ensure compliance with federal requirements and only allowable costs are charged to the program.

VIEWS OF RESPONSIBLE OFFICIALS See Corrective Action Plan.