Hayward Community School DistrictLocal Government

Significant Deficiency ? Limited Segregation of Duties Criteria: Internal controls should be in place to provide reasonable assurance that individuals have access to only one phase of the accounting process. Condition: The size of the office staff precludes segregation of accounting functions complete to assure adequate internal control. The Business Manager prepares bank reconciliations and posts cash receipts and disbursements to the District?s general ledger. Effect: Because of the lack of segregation of duties, there is a risk that the accounting records may be misstated or reports may be completed improperly and may not be prevented or detected and corrected on a timely basis. Recommendation: To address the control deficiency relative to the cash receipts and cash disbursement cycles, we recommend that an employee other than the District Account review the monthly bank reconciliation.

Significant Deficiency ? Annual Financial Reporting Under Generally Accepted Accounting Principles (GAAP) Criteria: Management is responsible for establishing internal controls to assure the District?s annual financial reporting is in accordance with GAAP. Condition: The potential exists that a material misstatement of the annual financial statements could occur and not be prevented or detected by the District?s internal controls. Effect: The District engages the audit firm to prepare drafts of its annual financial statements and related footnote disclosures in accordance with GAAP based on information and trial balances provided by management. Cause: The District?s staff does not possess the technical expertise, or the time required to draft the year end external financial statements. Recommendation: The District should continue to evaluate its internal staff and expertise to determine if an internal control policy over the annual financial reporting is beneficial. Management should review key disclosures in a checklist and receive additional education.

Significant Deficiency ? Limited Segregation of Duties CFDA Title: Medicaid Cluster/Title I-A Federal ID Number: N/A CFDA Number: 93.778/84.010 Year: Fiscal year ending June 30, 2021 Federal Agency: Wisconsin Department of Health Services/Department of Education Pass-through Agency: CESA/Wisconsin Department of Public Instruction Finding 2021-001 is pervasive to all programs of the District, including federal award programs. For information on finding 2021-001?s criteria, condition, cause, effect, recommendation, view of responsible official and questioned costs see the Schedule of Federal Findings and Questioned Costs Section II ? Financial Statement Findings. Finding 2021-001 is a repeat of finding 2020-001 in the immediately prior audit.

Significant Deficiency ? Annual Financial Reporting Under Generally Accepted Accounting Principles (GAAP) CFDA Title: Medicaid Cluster/Title I-A CFDA Number: 93.778/84.010 Federal ID Number: N/A Year: Fiscal year ending June 30, 2021 Federal Agency: Wisconsin Department of Health Services/Department of Education Pass-through Agency: CESA/Wisconsin Department of Public Instruction Finding and 2021-002 relates to the preparation of the schedule of expenditures of federal awards and related notes. For information on finding 2021-002?s criteria, condition, cause, effect, recommendation, view of responsible official and questioned costs see the Schedule of Federal Findings and Questioned Costs Section II ? Financial Statement Findings. Finding 2021-002 is a repeat of finding 2020-002 in the immediately prior audit.

Financial Statement Findings: 2020-001 Significant Deficiency - Limited Segregation of Duties Criteria: Internal controls should be in place to provide reasonable assurance that individuals have access to only one phase of the accounting process. Condition: The size of the office staff precludes segregation of accounting functions complete to assure adequate internal control. The Business Manager prepares bank reconciliations and posts cash receipts and disbursements to the District's general ledger. Effect: Because of the lack of segregation of duties, there is a risk that the accounting records may be misstated or reports may be completed improperly and may not be prevented or detected and corrected on a timely basis. Recommendation: To address the control deficiency relative to the cash receipts and cash disbursement cycles, we recommend that an employee other than the Districts Account review the monthly bank reconciliation. View of Responsible Official: Even though the district has a small staff, the Finance Coordinator and Business Manager both review entries made by the payroll clerk. The other financial steps and entry are divided between the Finance Coordinator and Business Manager so that there is less chance of misstatement or misappropriation. The general ledger revenues and expenditures are reviewed and compared to the budget by the District Administrator and School Board on a monthly basis. Questioned Costs: None.

Financial Statement Findings: 2020-002 Significant Deficiency - Annual Financial Reporting Under Generally Accepted Accounting Principles (GAAP) Criteria: Management is responsible for establishing internal controls to assure the District's annual financial reporting is in accordance with GAAP. Condition: The potential exists that a material misstatement of the annual financial statements could occur and not be prevented or detected by the District's internal controls. Effect: The District engages the audit firm to prepare drafts of its annual financial statements and related footnote disclosures in accordance with GAAP based on information and trial balances provided by management. Cause: The District's staff does not possess the technical expertise, or the time required to draft the year end external financial statements. Recommendation: The District should continue to evaluate its internal staff and expertise to determine if an internal control policy over the annual financial reporting is beneficial. Management should review key disclosures in a checklist and receive additional education. View of Responsible Official: The District recognized management's responsibility for the financial statements, despite being drafted by an accounting firm, due to the District's small size and limited staff the District does review and take responsibility for these statements. Questioned Costs: None

Federal Award Findings and Questioned Costs - 2020-003 Significant Deficiency - Internal Control Over Compliance Related to Impact Aid CFDA Title: Impact Aid CFDA Number: 84.041 Federal ID Number: 59-WI-2018-1005 Year: Fiscal year ending 6/30/20 Federal Agency: Department of Education. Pass-through Agency: N/A Criteria: Under Uniform Guidance the District is required to document and maintain internal controls over compliance with all direct and material compliance requirements. Impact Aid requirement N requires the District to ensure that it meets the required level of expenditure for providing special education and related services to federally connected children with disabilities. Condition: During our review of the District?s internal controls over compliance related to Impact Aid, we noted the application for funds received in 19-20 was reviewed after the application was submitted in January 2019 through an internal audit which applied key controls over the direct and material requirements relative to compliance requirement N ? Special Tests and Provisions. There were internal controls over compliance for the other direct and material compliance requirements of this major program, thus this appears to be an isolated incident. Cause: There were no internal controls over compliance in place over the direct and material compliance requirement (N) as identified above. Effect: The lack of preventive internal controls over this compliance requirement result in a higher probability of noncompliance with this requirement. Recommendation: We recommend that someone other than the preparer of the annual Impact Aid application perform a review and provide physical audit evidence of this review. The review should include ensuring the District?s calculations show the required level of expenditure for providing special education and related services to federally connected children and that this calculation is correct, the amounts agree to the supporting records, and if the calculation shows an overpayment, the average per pupil expenditure for federally connected children with disabilities exceeded the average per pupil expenditure for non-federally connected children to the extent of the overpayment. View of Responsible Official: The District worked with the US Department of Education Office of Elementary and Secondary Education with a corrective action plan to include internal audit controls to review data compiled for the Impact Aid application process prior to the official submission. This plan and timeline was approved by the Department of Education on July 18, 2019. The District did an internal audit on the January 2019 application (revenues in 19-20) for data verification and provided this for the 2019-20 audit. Future applications beginning in January 2020 have been subjected to these controls on a preventive basis and we anticipate this finding will be properly addressed from an internal control standpoint beginning with FYE 2021. Questioned Costs: None

Financial Statement Findings 2019-001 Significant Deficiency ? Limited Segregation of Duties Criteria: Internal controls should be in place to provide reasonable assurance that individuals have access to only one phase of the accounting process. Condition: The size of the office staff precludes segregation of accounting functions complete to assure adequate internal control. The Business Manager prepares bank reconciliations and posts cash receipts and disbursements to the District?s general ledger. Effect: Because of the lack of segregation of duties, there is a risk that the accounting records may be misstated or reports may be completed improperly and may not be prevented or detected and corrected on a timely basis. Recommendation: To address the control deficiency relative to the cash receipts and cash disbursement cycles, we recommend that an employee other than the District Account review the monthly bank reconciliation. View of Responsible Official: Even though the district has a small staff, the Finance Coordinator and Business Manager both review entries made by the payroll clerk. The other financial steps and entry are divided between the Finance Coordinator and Business Manager so that there is less chance of misstatement or misappropriation. The general ledger revenues and expenditures are reviewed and compared to the budget by the District Administrator and School Board on a monthly basis. Questioned Costs: None Federal Award Findings and Questioned Costs 2019-001 Significant Deficiency ? Limited Segregation of Duties CFDA Title: Impact Aid CFDA Number: 84.041 Federal ID Number: 59-WI-2018-1005 Year: Fiscal year ending 6/30/19 Federal Agency: Department of Education Pass-through Agency: N/A Finding 2019-001 is pervasive to all programs of the District, including federal award programs. For information on finding 2019-001?s criteria, condition, cause, effect, recommendation, view of responsible official and questioned costs see the Schedule of Federal Findings and Questioned Costs Section II ? Financial Statement Findings. Finding 2019-001 is a repeat of finding 2018-001 in the immediately prior audit.

Financial Statement Findings 2019-002 Significant Deficiency ? Annual Financial Reporting Under Generally Accepted Accounting Principles (GAAP) Criteria: Management is responsible for establishing internal controls to assure the District?s annual financial reporting is in accordance with GAAP. Condition: The potential exists that a material misstatement of the annual financial statements could occur and not be prevented or detected by the District?s internal controls. Effect: The District engages the audit firm to prepare drafts of its annual financial statements and related footnote disclosures in accordance with GAAP based on information and trial balances provided by management. Cause: The District?s staff does not possess the technical expertise, or the time required to draft the year end external financial statements. Recommendation: The District should continue to evaluate its internal staff and expertise to determine if an internal control policy over the annual financial reporting is beneficial. Management should review key disclosures in a checklist and receive additional education. View of Responsible Official: The District recognizes management?s responsibility for the financial statements, despite being drafted by an accounting firm, due to the District?s small size and limited staff the District does review and take responsibility for these statements. Questioned Costs: None 2019-002 Significant Deficiency ? Annual Financial Reporting Under Generally Accepted Accounting Principles (GAAP) CFDA Title: Impact Aid CFDA Number: 84.041 Federal ID Number: 59-WI-2018-1005 Year: Fiscal year ending 6/30/19 Federal Agency: Department of Education Pass-through Agency: N/A Finding and 2019-002 relates to the preparation of the schedule of expenditures of federal awards and related notes. For information on finding 2019-002?s criteria, condition, cause, effect, recommendation, view of responsible official and questioned costs see the Schedule of Federal Findings and Questioned Costs Section II ? Financial Statement Findings. Finding 2019-002 is a repeat of finding 2018-002 in the immediately prior audit.

Section III ? Federal Award Findings and Questioned Costs 2019-003 Significant Deficiency ? Internal Control Over Compliance Related to Impact Aid CFDA Title: Impact Aid CFDA Number: 84.041 Federal ID Number: 59-WI-2018-1005 Year: Fiscal year ending 6/30/19 Federal Agency: Department of Education Pass-through Agency: N/A Criteria: Under Uniform Guidance the District is required to document and maintain internal controls over compliance with all direct and material compliance requirements. Impact Aid requirement N requires the District to ensure that it meets the required level of expenditure for providing special education and related services to federally connected children with disabilities. Condition: During our review of the District?s internal controls over compliance related to Impact Aid, we noted that there were no internal controls over compliance for compliance requirement N ? Special Tests and Provisions (specifically there were no internal controls over compliance relating to the annual Impact Aid application process). There were internal controls over compliance for the other direct and material compliance requirements of this major program, thus this appears to be an isolated incident. Cause: There were no internal controls over compliance in place over the direct and material compliance requirement (N) as identified above. Effect: The lack of internal controls over this compliance requirement results in a higher probability of noncompliance with this requirement. Recommendation: We recommend that someone other than the preparer of the annual Impact Aid application perform a review and provide physical audit evidence of this review. The review should include ensuring the District?s calculations show the required level of expenditure for providing special education and related services to federally connected children and that this calculation is correct, the amounts agree to the supporting records, and if the calculation shows an overpayment, the average per pupil expenditure for federally connected children with disabilities exceeded the average per pupil expenditure for non-federally connected children to the extent of the overpayment. View of Responsible Official: The District worked with the US Department of Education Office of Elementary and Secondary Education with a corrective action plan to include internal audit controls to review data compiled for the Impact Aid application process prior to the official submission. This plan and timeline was approved by the Department of Education on July 18, 2019. The district did an internal audit on the January 2018 application and January 2019 application for data verification and provided for the 2018-19 audit. Questioned Costs: None Repeat finding from 2018: Yes.

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