White Shield School District

2022-001 Segregation of Duties Significant Deficiency This is a repeat finding. The prior-year audit finding number is 2021-001 CONDITION: The School has limited personnel responsible for most accounting functions. The School has limited staff that includes one business manager for the public school district and one business manager for the BIE funds that are responsible to collect monies, deposit monies, deposit monies, issue checks, send checks to vendors, record receipts and disbursements in journals, maintain the general ledger and prepare bank reconciliations. Both of these managers are also check signers for the School. The School has not implemented sufficient mitigating controls to warrant a resolution to this finding. CRITERIA: To ensure adequate internal controls over financial reporting and prevent material misstatements due to error or fraud, there should be a segregation of the functions of approval, custody of assets, posting and reconciliations. CAUSE: The School does not have a large enough staff to properly segregate all duties. EFFECT: A lack of segregation of duties leads to a limited degree on internal controls.

2022-002 Financial Statement Reconciliations/Tie-In Procedures Significant Deficiency CONDITION: A weakness existed in the overall reconciliation/tie-in procedures performed over the School’s financial statement accounts for the fiscal year ended June 30, 2022. Financial accounts were either reconciled untimely or in some cases, accounts were not reconciled at all. Most of these accounts should be reconciled on a monthly basis. The major areas where reconciliation procedures were weak included:A) Beginning Balances B) Cash Balances C) Account Receivables D) Grant Receivables/Unearned Revenues E) Accounts Payable F) Grant Revenue CRITERIA: OMB Uniform Guidance states the following in section 200.302, “(2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.327 Financial reporting and 200.328 Monitoring and reporting program performance. CAUSE: Lack of written policies and procedures over financial tie-in procedures that identify who is responsible for performing these tie-in/reconciliation procedures. EFFECT: In the course of performing the audit, the auditor recommended 10 adjusting journal entries be made to the financial statements for fiscal year ending June 30, 2022. Many of these adjustments could have been avoided if timely reconciliation and tie-in procedures had been conducted by the finance department. Many of these audit adjustments were material in nature.

2022-003 Support for Expenditures Material Weakness CONDITION: Under the expenditures testing procedures the following were noted: • 24 out of 70 expenditures tested were missing invoice support • 26 out of 70 expenditures tested were missing adequate internal control documents. CRITERIA: Section 200.302 Financial Management of the Office of Management and Budget’s Uniform Guidance includes the following financial management system requirements: • Records must be maintained that adequately identify the source and application of funds for federally funded activities. These records must…be supported by source documentation. In the “Requisitions & Purchase Orders” section of the School’s policies and procedures it states that “Requests for budget items shall originate from the personnel directly responsible for their use. The principal of each building is responsible for submitting requisitions to the Superintendent after consultation with and at the request of personnel within the building. CAUSE: Payments are able to be made without going through the proper approvals.

2022-004 Timesheets Material Weakness CONDITION: The following conditions were noted during our timesheet testing: • 67 out of 77 timesheets tested did not indicate a program to be charged • 3 out of 77 timesheets tested were not signed by the employee 8 out of 77 timesheets tested were not signed by the employer. CRITERIA: Section 200.302 Financial Management of the Office of Management and Budget’s Uniform Guidance includes the following financial management system requirements:• Records that identify adequately the source and application of funds for federally-funded activities. Under Recordkeeping of the White Shield School Districts policies it states that “Accurate records shall be kept of hours worked by all classified employees. The Business Managers shall institute a system of recordkeeping.” CAUSE: Inadequate completion of the timesheet or the timesheet lacks a place for the program coding. EFFECT: Reportable compliance findings due to noncompliance with federal guidelines (OMB Uniform Guidance). Without proper support of salaries and wages the related expenditures are subject to disallowance by funding agencies.

2022-005 Bank Reconciliations Material Weakness CONDITION: The following conditions were noted during our bank reconciliation testing: • Auditors could not determine the timing of the preparation of monthly bank reconciliations • Bank reconciliations are being performed by hand (outside of their accounting system) • Bank reconciliations did not agree with their accounting system, and were off by a material amount • Bank reconciliations did not have preparer and reviewer signatures CRITERIA: Under Financial Oversight and Controls in the School’s policies and procedures it states that “The Superintendent shall maintain a system of internal controls to identify potential risks, manage potential risks, and deter and monitor fraud and financial impropriety in the District.” CAUSE: A written policy does not exist over the completion of bank reconciliations and a lack of proper monitoring by management. EFFECT: The School’s financial accounting software system reports may be inaccurate.

2022-006 Property Management Material Weakness CONDITION: It was noted during the audit that documentation for a detailed listing of fixed assets, a depreciation schedule and periodic inventories for fixed assets have not been maintained. CRITERIA: Federal funding agencies require maintenance of a property management system to meet statutory requirements set forth under funding contracts 2 CFR 200.313(d)(1) outline the requirements of a property management system. CAUSE: Lack of existing policies & procedures and staffing issues have contributed to this condition. EFFECT: Weak internal controls over fixed assets limits the School’s ability to properly report and safeguard its assets. Assets could be taken from the School, and it go undetected for a long period of time or never be detected at all. Weak controls also significantly increase the risk of financial misstatement occurring. Insufficient or excessive insurance coverage could result as well.

2022-007 Procurement Material Weakness CONDITION: Out of 6 procurements selected for testing 6 did not have an adequate number of bids/quotes documented or an allowable sole source justification documented. CRITERIA: Section 200.320 Methods of Procurement to be Followed of the Office of Management and Budget’s Uniform Guidance outlines the following requirements:• Price or rate quotations must be obtained from an adequate number of qualified sources if the procurement exceeds the small purchase threshold ($10,000). • Formal bidding procedures must be used if the procurement exceeds the Simplified Acquisition Threshold ($250,000). • Sole sourcing is only allowed when one or more of the following circumstances apply: (1) The item is available only from a single source; (2) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (3) The federal agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-federal entity; or (4) After solicitation of a number of sources, competition is determined inadequate CAUSE: Adopted policies do not reflect requirements outlined in the OMB Uniform Guidance. EFFECT: The School may be paying too much for goods and services.

CONDITION: The School’s audit was not completed and the data collection form and reporting package were not submitted within nine months after the end of the audit period. CRITERIA: Section 200.512 Report 2022-008 Late Audit SubmissionSubmission of the Office of Management and Budget’s Uniform Guidance states, “The audit must be completed and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section 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. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day.”CAUSE: The School’s financial statements and records were not ready for audit in a timely fashion that allowed for a timely audit submission.EFFECT: The awarding agency could restrict future grant payments to the School.