Allegany County Board of EducationLocal Government

Internal Control Findings 2024-001 Monitoring of Internal Controls Criteria: Management should have a formal system in place to monitor the adequacy and effectiveness of the Board’s system of internal controls. Condition: Management does not have an adequate system in place to provide ongoing or separate evaluations of the effectiveness of the Board’s system of internal controls. The current system does not routinely monitor and test the controls in place and is performed by the Finance Department who reports to management rather than directly to the governing board. Cause: The Board does not have an employee independent of the Finance Department who is responsible for monitoring the system of internal controls and who reports directly to the governing Board. Effect: The Board’s system of internal controls may not be designed or operating effectively or as intended. Monitoring of internal controls is essential to provide reasonable assurance that controls will prevent or detect material misstatements in the financial statements in a timely manner. Repeat Finding: This finding is a repeat of a finding in the prior year audit (Finding 2023-001). Recommendation: We recommend the Board of Education employ an individual to perform internal audit functions on a periodic basis. The individual should be from outside the finance department and would report directly to the Board Officials. Views of Responsible Officials and Planned Corrective Action: The Board acknowledges the value of an internal audit/monitoring function. However, as a result of budget constraints, the Board does not plan to implement an internal audit/monitoring function. The Board will continue the monitoring efforts in place.

2024-002 Payroll and Statement of Compliance Reports Federal Programs: COVID 19 – Education Stabilization Fund Criteria: 29 Code of Federal Regulations Part 5, Labor Standards Provisions Applicable to Contracts Governing Federally Financed and Assisted Construction provides requirements for nonfederal entities regarding Wage Rate Requirements. These include a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). The requirement is to be included in the construction contract. The Board had such contracts and used federal funds to pay for the projects, but did not always receive weekly reports, and the requirement was not included in their construction contracts. Condition: Payroll reports and a statement of compliance with prevailing wage rates are to be received weekly for construction contracts subject to Wage Rate Requirements, often referenced as the Davis-Bacon Act. The requirement to receive these reports weekly should be included in the construction contract. Cause: Management was not aware of the requirement to receive weekly reports and for the requirement to be in their contracts. Effect: Wage and Rate Requirements could be violated without the noncompliance being recognized in a timely manner. Recommendation: We recommend that management reference the Code of Federal Regulations and relevant compliance supplements and cross-cutting supplements for any expenditures of federal awards. Views of Responsible Officials and Planned Corrective Action: The Board acknowledges its lack of compliance relative to contractor and subcontractor payroll monitoring and omitting this requirement within the contract. The Board did provide for prevailing wage requirements within the contracts. Going forward when federal funds are utilized for construction projects, management will reference the Code of Federal Regulation and relevant compliance supplements and cross-cutting supplements for expenditures of federal awards.

2024-003 Documentation of Procurement Procedures Federal Programs: All Major Programs Criteria: Management's procurement policy exceeds requirements under the Code of Federal Regulations, Part 200 Subpart D Procurement Standards. That policy requires that justification of the use of sole sourcing or noncompetitive proposals must be documented and retained and research on availability of multiple sources must be documented and retained. Further, any initial solicitations from multiple sources which are concluded to be inadequate, and such reasoning, must be documented. Condition: Management has not adequately documented procedures related to noncompetitive or sole source procurements. existing cooperative purchasing agreements, the State of Maryland Purchasing Group, or another district's procured contract without further documenting their purchases. Effect: Purchases could be made that did not adhere to the Code of Federal Regulations, Part 200 Subpart D Procurement Standards. Recommendation: We recommend that the Board's procurement policy be followed as to required documentation for each purchase. Views of Responsible Officials and Planned Corrective Action: Finance will meet with purchasing agents to communicate procurement requirements, including documentation requirements, to avoid future misinterpretations and noncompliance with the Board’s approved procurement policy.

2024-004 Subscription-Based Information Technology Arrangements Federal Programs: All Major Programs Criteria: GASB No. 96, Subscription-Based Information Technology Arrangements, requires payments for arrangements with terms extending beyond the date of the financial statements to be expensed in the fund financial statements. Condition: Subscription-based information technology arrangements were not recorded properly in the fund financial statements. Cause: The guidance regarding the treatment of prepayments in GASB No. 96 was vague, not overt, and required interpretation. Effect: Prepayments for subscription-based information technology arrangements were not recorded properly in the fund financial statements. Recommendation: We recommend management use all resources at its disposal when implementing new and complex accounting pronouncements. Views of Responsible Officials and Planned Corrective Action: Finance will review and participate in staff development and CPE opportunities relating to the implementation of new and complex accounting pronouncements.

2023-001 Monitoring of Internal Controls. Criteria: Management should have a formal system in place to monitor the adequacy and effectiveness of the Board’s system of internal controls. Condition: Management does not have an adequate system in place to povide ongoing or separate evaluations of the effectiveness of the Board’s system of internal controls. The current system does not routinely monitor and test the controls in place and is performed by the Finance Department who reports to management rather than directly to the governing board. Cause: The Board does not have an employee independent of the Finance Department who is responsible for monitoring the system of internal controls and who reports directly to the governing Board. Effect: The Board’s system of internal controls may not be designed or operating effectively or as intended. Monitoring of internal controls is essential to provide reasonable assurance that controls will prevent or detect material misstatements in the financial statements in a timely manner. Repeat Finding: This finding is a repeat of a finding in the prior year audit (Finding 2022-001). Recommendation: We recommend the Board of Education employ an individual to perform internal audit functions on a periodic basis. The individual should be from outside the finance department and would report directly to the Board Officials. Views of Responsible Officials and Planned Corrective Action: The Board acknowledges the value of an audit/monitoring function. However, as a result of budget constraints, the Board does not plan to implement an internal audit/monitoring function.

2023-002 Material Adjustments to the Financial Statements were Required. Criteria: Governmental entities are required to maintain a system of internal controls such that all material transactions are properly recorded as to amount, account, and period. Condition: Material adjustments to the Board’s financial statements were required. A material adjustment to the School Construction Fund was required as a deferred revenue was not recorded for the year ended June 30, 2022. As a result, revenue and fund balance were overstated. A material adjustment to the Student Activities Fund was required. The Board determined that as GASB 84, Fiduciary Activities was effective during the year ended June 30, 2022, the Student Activities Fund should have been reported as a Government Fund and not a Fiduciary Fund. These errors were corrected with a prior period adjustment in the June 30, 2023 financial statements. Cause: There was a lack of understanding of deferred revenues and GASB 84, Fiduciary Activities. Effect: Revenues and fund balance were overstated by a material amount in the School Construction Fund for the year ended June 30, 2022. Fund balance was overstated for the Fiduciary Fund and understated for the Government Funds for the year ended June 30, 2022. These errors were corrected on the June 30, 2023 financial statements with a prior period adjustment. If the adjustments were not made, the financial statements would be materially misstated and could have improperly influenced the users of the financial statements. Repeat Finding: This finding is a repeat of a finding in the prior year audit (Finding 2022-002). Recommendation: We recommend that staff be more cognizant of the governmental accounting principles for revenue recognition and stay abreast of changing governmental accounting standards. Views of Responsible Officials and Planned Corrective Action: The recognition of state revenue relative to the School Construction Fund projects has been an ongoing audit discussion topic. The Board acknowledges that they are responsible for the financial statements and now understand the application of state revenues and corresponding deferrals relative to school construction projects. The Board will remain cognizant of the application of governmental accounting principles for revenue recognition. The Board further acknowledges the expectation and need to stay abreast of changing governmental accounting standards such as GASB 84. This will be addressed by staff through ongoing staff development opportunities and continuing professional education outlets.

2022-001 Monitoring of Internal Controls Criteria: Management should have a formal system in place to monitor the adequacy and effectiveness of the Board?s system of internal controls. Condition: Management does not have an adequate system in place to provide ongoing or separate evaluations of the effectiveness of the Board?s system of internal controls. The current system does not routinely monitor and test the controls in place and is performed by the Finance Department who reports to management rather than directly to the governing board. Cause: The Board does not have an employee independent of the Finance Department who is responsible for monitoring the system of internal controls and who reports directly to the governing Board. Effect: The Board?s system of internal controls may not be designed or operating effectively or as intended. Monitoring of internal controls is essential to provide reasonable assurance that controls will prevent or detect material misstatements in the financial statements in a timely manner. Repeat Finding: This finding is a repeat of a finding in the prior year audit (Finding 2021-001). Recommendation: We recommend the Board of Education employ an individual to perform internal audit functions on a periodic basis. The individual should be from outside the finance department and would report directly to the Board Officials. Views of Responsible Officials and Planned Corrective Action: The Board acknowledges the value of an audit/monitoring function. However, as a result of budget constraints, the Board does not plan to implement in internal audit/monitoring function.

2022-002 Material Adjustments to the Financial Statements were Required Criteria: Governmental entities are required to maintain a system of internal controls such that all material transactions are properly recorded as to amount, account, and period. Condition: Material adjustments to the Board?s financial statements were required. Material adjustment to the Restricted Fund resulted from the purchase of multi-year subscriptions and licenses that were fully expensed in the current year. Per generally accepted accounting principles, the portion of multi-year contracts that is attributable to future periods is to be record as prepaid expense. Cause: For the current year adjustment, there was a lack of recognition for the purchase of multi-year contracts as to the period of benefit. Effect: Revenues and expenditures were overstated by a material amount in the Restricted Fund. If the adjustments were not made, the financial statements would be materially misstated and could have improperly influenced the users of the financial statements. Repeat Finding: This finding is a repeat of a finding in the prior year audit (Finding 2021-002). Recommendation: We recommend that staff be more cognizant of the terms of multi-year contracts to ensure that expenditures are recognized in the proper period. Views of Responsible Officials and Planned Corrective Action: The Board entered into multi-year contracts to garner additional savings for the district during the contractual period. The Board has developed allocation schedules to ensure a more appropriate matching of expense to the financial period. The Board may continue to enter into multi-year agreements for contractual savings but will expense only the portion of the contract in the period of performance.

2022-003 Noncompliance with Procurement Requirements Federal Programs: Coronavirus State and Local Fiscal Recovery Funds (CFDA No. 21.027) and Special Education (CFDA No.?s 84.027 and 84.173) Criteria: Recipients are required to comply with 2 CFR sections 200.318 through 200.327, including ensuring that the procurement method used for the contracts are appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. The Board follows the Annotated Code of Maryland, the Education Article, and Board Policy DJB with respect to procurement. For purchases between $3,501 and $25,000, two written oral quotes must be acquired. Condition: Seven purchases between $3,501 and $25,000 were noted for which there was not documentation of two quotes or supporting documentation of single sourcing. Cause: The individuals in charge of purchasing did not document their procedures. Effect: The Board is not in compliance with the procurement requirements of the grant which could affect future funding. Repeat Finding: This finding was not a finding in FY21. Recommendation: We recommend the grants administrators communicate procurement requirements, including documentation requirements, to purchasing agents in order to avoid future misinterpretations and noncompliance. Views of Responsible Officials and Planned Corrective Action: The Board will communicate procurement requirements to purchasing agents in order to avoid future misinterpretation and noncompliance. In most instances, evidence of procurement requirement compliance was observed, but not documented appropriately for compliance requirements.

2022-004 Lack of Internal Controls over Activities Allowed or UnallowedFederal Programs: Special Education (CFDA No.?s 84.027 and 84.173) Criteria: Governmental entities are required to maintain a system of internal controls such that all compliance requirements are fulfilled. Condition: The Board is required to submit an annual IDEA Excess Cost Requirement Calculation Template and Certification to determine if activities are allowed or unallowed. The Board?s SFY 2022 submission contained errors. Cause: The Board did not diligently complete the SFY 2022 IDEA Excess Cost Requirement Calculation Template and Certification, and the form could not be relied upon to show compliance with activities allowed or unallowed. Effect: Preparing an inaccurate Template and Certification could result in the Board mistakenly concluding they were in compliance when they were not. Completion of a revised Template and Certification indicated the Board was in compliance with activities allowed or unallowed. Repeat Finding: This finding was not a finding in FY21. Recommendation: We recommend that staff maintain detailed worksheets with the prepared Template and Certification and that the report and supporting worksheets be reviewed by a second member of the finance staff. Views of Responsible Officials and Planned Corrective Action: Board finance staff will implement a review process prior to signing off on the annual Special Education IDEA Excess Cost Template and Certification. The Board acknowledges the importance of the accuracy of the report it certifies.

2021-001 MONITORING OF INTERNAL CONTROLS - ALL MAJOR PROGRAMS - CRITERIA: MANAGEMENT SHOULD HAVE A FORMAL SYSTEM IN PLACE TO MONITOR THE ADEQUACY AND EFFECTIVENESS OF THE BOARD'S SYSTEM OF INTERNAL CONTROLS. CONDITION: MANAGEMENT DOES NOT HAVE AN ADEQUATE SYSTEM IN PLACE TO PROVIDE ONGOING OR SEPARATE EVALUATIONS OF THE EFFECTIVENESS OF THE BOARD'S SYSTEM OF INTERNAL CONTROLS. THE CURRENT SYSTEM DOES NOT ROUTINELY MONITOR AND TEST THE CONTROLS IN PLACE AND IS PERFORMED BY THE FINANCE DEPARTMENT WHO REPORTS TO MANAGEMENT RATHER THAN DIRECTLY TO THE GOVERNING BOARD. CAUSE: THE BOARD DOES NOT HAVE AN EMPLOYEE INDEPENDENT OF THE FINANCE DEPARTMENT WHO IS RESPONSIBLE FOR MONITORING THE SYSTEM OF INTERNAL CONTROLS AND WHO REPORTS DIRECTLY TO THE GOVERNING BOARD. EFFECT: THE BOARD'S SYSTEM OF INTERNAL CONTROLS MAY NOT BE DESIGNED OR OPERATING EFFECTIVELY OR AS INTENDED. MONITORING OF INTERNAL CONTROLS IS ESSENTIAL TO PROVIDE REASONABLE ASSURANCE THAT CONTROLS WILL PREVENT OR DETECT MATERIAL MISSTATEMENTS IN THE FINANCIAL STATEMENTS IN A TIMELY MANNER. REPEAT FINDING: THIS FINDING IS A REPEAT OF A FINDING IN THE PRIOR YEAR AUDIT (FINDING 2020-001). RECOMMENDATION: WE RECOMMEND THAT THE BOARD OF EDUCATION EMPLOY AN INDIVIDUAL TO PERFORM INTERNAL AUDIT FUNCTIONS ON A PERIODIC BASIS. THE INDIVIDUAL SHOULD BE FROM OUTSIDE THE FINANCE DEPARTMENT AND WOULD REPORT DIRECTLY TO BOARD OFFICIALS. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION: THE BOARD ACKNOWLEDGES THE VALUE OF AN INTERNAL AUDIT/MONITORING FUNCTION. HOWEVER, AS A RESULT OF BUDGET CONSTRAINTS, THE BOARD DOES NOT PLAN TO IMPLEMENT AND INTERNAL AUDIT/MONITORING FUNCTION.

2021-002 MATERIAL ADJUSTMENTS TO THE FINANCIAL STATEMENTS WERE REQUIRED - ALL MAJOR PROGRAMS - CRITERIA: GOVERNMENTAL ENTITIES ARE REQUIRED TO MAINTAIN A SYSTEM OF INTERNAL CONTROLS SUCH THAT ALL MATERIAL TRANSACTIONS ARE PROPERLY RECORDED AS TO AMOUNT, ACCOUNT, AND PERIOD. CONDITION: MATERIAL ADJUSTMENTS TO THE BOARD'S FINANCIAL STATEMENTS WERE REQUIRED FOR BOTH PRIOR YEAR AND CURRENT YEAR AMOUNTS. MATERIAL ADJUSTMENT TO PRIOR YEAR AMOUNTS RESULTED FROM AN UNIDENTIFIED PROJECT IN THE SCHOOL CONSTRUCTION FUND. THIS PROJECT WAS COMMITTED TO BY THE STATE OF AS JUNE 30, 2020. AS PER THE STATE OF MARYLAND'S REQUIREMENTS, THE COMMITTED FUNDS ARE TO BE RECOGNIZED AS ACCOUNTS RECEIVABLE WHEN COMMITTED, EVEN IF THEY ARE TO BE EXPENDED IN FUTURE YEARS. MATERIAL ADJUSTMENT RELATED TO CURRENT YEAR AMOUNTS RESULTED FROM THE PURCHASE OF MULTI-YEAR SUBSCRIPTIONS AND LICENSES THAT WERE FULLY EXPENSED IN THE CURRENT YEAR. PER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, THE PORTION OF MULTI-YEAR CONTRACTS THAT IS ATTRIBUTABLE TO FUTURE PERIODS IS TO BE RECORDED AS A PREPAID EXPENSE. CAUSE: FOR THE PRIOR YEAR ADJUSTMENT, THE PROJECT IN QUESTION WAS COMMITTED FROM A DIFFERENT FUNDING SOURCE THAN THE OTHER PROJECTS WHICH WERE PROPERLY ACCOUNTED FOR. FOR THE CURRENT YEAR ADJUSTMENT, THERE WAS SOME CONFUSION SURROUNDING THE PURCHASE OF MULTI-YEAR CONTRACTS AS THEY WERE PURCHASED WITH GRANT FUNDS WITH VARYING PERIODS OF PERFORMANCE. EFFECT: PRIOR YEAR ASSETS AND REVENUES WERE UNDERSTATED BY A MATERIAL AMOUNT IN THE SCHOOL CONSTRUCTION FUND. CURRENT YEAR REVENUES AND EXPENDITURES WERE OVERSTATED BY A MATERIAL AMOUNT IN THE RESTRICTED FUND. IF THE ADJUSTMENTS WERE NOT MADE, THE FINANCIAL STATEMENTS WOULD BE MATERIALLY MISSTATED AND COULD HAVE IMPROPERLY INFLUENCED THE USERS OF THE FINANCIAL STATEMENTS. REPEAT FINDING: THIS FINDING WAS NOT A FINDING IN FY20. RECOMMENDATION: WE RECOMMEND THAT FINANCE DEPARTMENT STAFF DEVELOP AND IMPLEMENT POLICIES AND PROCEDURES TO ENSURE THAT ALL PROJECTS, EVEN THOSE FROM VARYING FUNDING SOURCES, ARE PROPERLY RECORDED IN THE SCHOOL CONSTRUCTION FUND WHEN COMMITTED. WE FURTHER RECOMMEND THAT STAFF BE MORE COGNIZANT OF THE TERMS OF MULTI-YEAR CONTRACTS TO ENSURE THAT EXPENDITURES ARE RECOGNIZED IN THE PROPER PERIOD. VIEWS OF RESPONSIBLE OFFICIALS: SCHOOL CONSTRUCTION PROJECTS ARE TYPICALLY DETERMINABLE AND THE BOARD AGREES TO WORK MORE COLLABORATIVELY WITH STATE RESOURCES SUCH AS THE IAC AND MSDE TO ACCURATELY DETERMINE FUNDING COMMITMENTS FROM THE STATE SO THAT THE BOARD RECOGNIZES THOSE COMMITMENTS ACCURATELY WITHIN ITS ANNUAL FINANCIAL STATEMENTS. THE BOARD ENTERED INTO MULTI-YEAR CONTRACTS TO GARNER ADDITIONAL SAVINGS FOR THE DISTRICT DURING THE CONTRACTUAL PERIOD. THE BOARD HAS DEVELOPED ALLOCATION SCHEDULES TO ENSURE A MORE APPROPRIATE MATCHING OF EXPENSES TO THE FINANCIAL PERIOD. THE BOARD MAY CONTINUE TO ENTER INTO MULTI-YEAR AGREEMENTS FOR CONTRACTUAL SAVINGS, BUT WILL EXPENSE ONLY THE PORTION OF THE CONTRACT IN THE PERIOD OF PERFORMANCE.

2021-003 NONCOMPLIANCE WITH REPORTING REQUIREMENTS - CORONAVIRUS RELIEF FUND (CFDA NO. 21.019) - CRITERIA: PER THE GRANT AGREEMENT, THE FINAL REPORT AND FINAL ACCOUNTING ARE DUE WITHIN 30 CALENDAR DAYS AFTER THE GRANTEE MAKES THE LAST PURCHASE TO BE PAID WITH GRANT FUNDS. PER AN EMAIL FROM THE GRANTOR, THE REPORTS ARE DUE AS STATED IN THE AGREEMENT, BUT NO LATER THAN MARCH 1, 2021. THE EMAIL ALSO INDICATES THAT THE LAST INVOICE PAYMENT FOR SERVICES OR EQUIPMENT RELATED TO THE GRANT WILL BE THE START OF THE 30-DAY PERIOD. CONDITION: THE LAST INVOICE PAYMENT MADE USING THESE GRRANT FUNDS WAS PAID ON DECEMBER 18, 2020, WHICH STARTED THE 30-DAY PERIOD. THE FINAL REPORT AND FINAL ACCOUNTING WERE FILED JANUARY 28, 2021, OR 41 DAYS AFTER THE FINAL PAYMENT WAS MADE. CAUSE: DUE TO A MISINTERPRETATION OF THE INFORMATION PROVIDED BY THE GRANTOR, THE GRANTS ACCOUNTANT AND GRANT ADMINISTRATOR BELIEVED THAT THE FINAL REPORT AND FINAL ACCOUNTING NEEDED TO BE FILED BY MARCH 1, 2021. EFFECT: THE BOARD IS NOT IN COMPLIANCE WITH THE REPORTING REQUIREMENTS OF THE GRANT WHICH COULD AFFECT FUTURE FUNDING. REPEAT FINDING: THIS FINDING WAS NOT A FINDING IN FY20. RECOMMENDATION: WE RECOMMEND THAT IN THE FUTURE, BOTH THE GRANTS ACCOUNTANT AND THE GRANTS ADMINISTRATORS VERIFY THE REPORTING REQUIREMENTS WITH THE GRANTOR IN ORDER TO AVOID FUTURE MISINTERPRETATIONS AND NONCOMPLIANCE. VIEWS OF RESPONSIBLE OFFICIALS: IN THIS CASE, THE BOARD DID MISINTERPRET THE DUE DATE OF THE FINAL REPORT AND THE REPORT WAS SUBSEQUENTLY LATE BY APPROXIMATELY 11 DAYS. THE GRANT ADMINISTRATOR AND FINANCE REPRESENTATIVES WILL BE MORE DILIGENT IN MAKING SURE FUTURE REPORTING REQUIREMENTS ARE MET RELATIVE TO ALL GRANTS.

2020-001 MONITORING OF INTERNAL CONTROLS: CRITERIA: MANAGEMENT SHOULD HAVE A FORMAL SYSTEM IN PLACE TO MONITOR THE ADEQUACY AND EFFECTIVENESS OF THE BOARD'S SYSTEM OF INTERNAL CONTROL. CONDITION: MANAGEMENT DOES NOT HAVE AN ADEQUATE SYSTEM IN PLACE TO PROVIDE ONGOING OR SEPARATE EVALUATIONS OF THE EFFECTIVENESS OF THE BOARD'S SYSTEM OF INTERNAL CONTROLS. THE CURRENT SYSTEM DOES NOT ROUTINELY MONITOR AND TEST THE CONTROLS IN PLACE AND IS PERFORMED BY THE FINANCE DEPARTMENT WHO REPORTS TO MANAGEMENT RATHER THAN DIRECTLY TO THE GOVERNING BOARD. CAUSE: THE BOARD DOES NOT HAVE AN EMPLOYEE INDEPENDENT OF THE FINANCE DEPARTMENT WHO IS RESPONSIBLE FOR MONITORING THE SYSTEM OF INTERNAL CONTROLS AND WHO REPORTS DIRECTLY TO THE GOVERNING BOARD. EFFECT: THE BOARD'S SYSTEM OF INTERNAL CONTROLS MAY NOT BE DESIGNED FOR OPERATING EFFECTIVELY OR AS INTENDED. MONITORING OF INTERNAL CONTROLS IS ESSENTIAL TO PROVIDE REASONABLE ASSURANCE THAT CONTROLS WILL PREVENT OR DETECT MATERIAL MISSTATEMENTS IN THE FINANCIAL STATEMENTS IN A TIMELY MANNER. REPEAT FINDING: THIS FINDING IS A REPEAT OF A FINDING IN THE PRIOR YEAR AUDIT (FINDING 2019-001). RECOMMENDATION: WE RECOMMEND THE BOARD OF EDUCATION EMPLOY AN INDIVIDUAL TO PERFORM INTERNAL AUDIT FUNCTIONS ON A PERIODIC BASIS. THIE INDIVIDUAL SHOULD BE FROM OUTSIDE THE FINANCE DEPARTMENT AND WOULD REPORT DIRECTLY TO THE BOARD OFFICIALS. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION: THE BOARD ACKNOWLEDGES THE VALUE OF THE INTERNAL AUDIT/MONITORING FUNCTION. HOWEVER, AS A RESULT OF BUDGET CONSTRAINTS, THE BOARD DOES NOT PLAN TO IMPLEMENT AN INTERNAL AUDIT/MONTIORING FUNCTION. THE BOARD WILL CONTINUE THE MONITORING EFFORTS IN PLACE.

2020-002 INEFFECTIVE INTERNAL CONTROLS RELATED TO FIXED ASSETS: CRITERIA: PER THE BOARD OF EDUCATION'S FIXED ASSET POLICY, UPON COMPLETION OF THE CAPITAL ASSET ACQUISITION FORM AND RECEIPT OF THE INVOICE AND/OR PURCHASE ORDER, THE SENIOR ACCOUNTANT LOCATES THE FIXED ASSET, VERIFIES THE ASSET TO THE INVOICE AND/OR PURCHASE ORDER AND SERIAL NUMBER, AND THEN AFFIXES A BARCODE TO THE ASSET. ASSETS ARE THEN TRACED TO THE FIXED ASSETS REPORT AS A FORM OF CHECKS AND BALANCES. CONDITION: BARCODES WERE NOT AFFIXED TO ALL FIXED ASSETS PURCHASED IN FISCAL YEAR 2020 AS OF JUNE 30, 2020. CAUSE: DUE TO MULTIPLE PERSONNEL CHANGES IN FISCAL YEAR 2016, THE BOARD FELL BEHIND IN THE TAGGING OF FIXED ASSETS. THE ISSUE HAS NOT BEEN REMEDIED. EFFECT: FAILURE TO COMPLY WITH THE FIXED ASSET POLICY COULD RESULT IN THEFT OF UNTAGGED ASSETS THAT WOULD NOT BE DISCOVERED UNTIL AN ASSET REVIEW WAS PERFORMED. ADDITIONALLY, FINANCIAL REPORTING INFORMATION COULD BE MISSTATED IF THE ASSETS WERE NOT ENTERED INTO THE SYSTEM AFTER TAGGING. REPEAT FINDING: THIS FINDING IS A REPEAT FINDING FROM THE PRIOR YEAR AUDIT (FINDING 2019-003). RECOMMENDATION: WE RECOMMEND THAT UNTAGGEGD FY20 FIXED ASSET PURCHASES BE TAGGED IMMEDIATELY, IF THEY HAVE NOT ALREADY BEEN TAGGED. WE FURTHER RECOMMEND THAT GOING FORWARD, STEPS SHOULD BE TAKEN TO ENSURE THAT ALL FIXED ASSET PURCHASES ARE TAGGED AND ENTERED INTO THE SYSTEM UPON RECEIPT RATHER THAN DOING SO AS PART OF YEAR-END PROCEDURES. VIEWS OF RESPONSIBLE OFFICIALS: WHILE SIGNIFICANT PROGRESS HAS BEEN MADE IN FIXED ASSET REPORTING, TECHNICALLY ALL ASSETS WERE NOT TAGGED AT 06/30/20. ASSETS PRIMARILY PURCHASED IN THE FOURTH QUARTER MAY NOT HAVE BEEN TAGGED AS OUTLINED IN POLICY. THOSE ASSETS HAVE NOW BEEN TAGGED WITH A FEW COVID-RELATED EXCEPTIONS. BOARD STAFF WILL BE RECOMMENDING THAT THE POLICY COMMITTEE REVIEW AND REVISE THE FIXED ASSET POLICY TO READ THAT ASSETS MUST BE TAGGED WITHIN 30 DAYS OF THE END OF THE QUARTER, GIVEN THE DIFFICULTY OF HAVING EVERYTHING TAGGED BY 06/30/20, ESPECIALLY AS INVOICES FLOW IN AT YEAR. FIXED ASSETS PURCHASED IN THE FIRST QUARTER OF FISCAL 2021 HAVE BEEN TAGGED.

2019-001 Monitoring of Internal Controls Criteria: Management should have a formal system in place to monitor the adequacy and effectiveness of the Board?s system of internal controls. Condition: Management does not have an adequate system in place to provide ongoing or separate evaluations of the effectiveness of the Board?s system of internal controls. The current system does not routinely monitor and test the controls in place and is performed by the Finance Department who reports to management. Cause: The Board does not have an employee independent of the Finance Department who is responsible for monitoring the system of internal controls and who reports directly to the governing Board. Effect: The Board?s system of internal controls may not be designed or operating effectively or as intended. Monitoring of internal controls is essential to provide reasonable assurance that controls will prevent or detect material misstatements in the financial statements in a timely manner. Repeat Finding: This finding is a repeat of a finding in the prior year audit. Recommendation: We recommend the Board of Education employ an individual to perform internal audit functions on a periodic basis. The individual should be from outside the finance department and would report directly to the Board Officials. Views of Responsible Officials and Planned Corrective Action: The Board acknowledges the value of the internal audit/monitoring function. However, as a result of budget constraints, the Board does not plan to implement an internal audit/monitoring function.

2019-003 Ineffective Internal Controls Related to Fixed Assets Criteria: Per the Board of Education?s Fixed Asset Policy, upon completion of the Capital Asset Acquisition Form and receipt of the invoice and/or purchase order, the Senior Accountant locates the fixed asset, verifies the asset to the invoice and serial number, and then affixes a barcode to the asset. Assets are then traced to the fixed assets report as a form of checks and balances. Condition: Barcodes were not affixed to fixed assets purchased in fiscal year 2019. Cause: Due to multiple personnel changes in fiscal year 2016, the Board fell behind in the tagging of fixed assets. The issue has not been remedied. Effect: Failure to comply with the fixed asset policy could result in theft of untagged assets that would not be discovered until an asset review was performed. Additionally, financial reporting information could be misstated if the assets were not entered into the system after tagging. Repeat Finding: This finding is a repeat of a finding from the prior year audit. Recommendation: We recommend that untagged fixed assets be tagged immediately. We further recommend that going forward, steps should be taken to ensure that all fixed asset purchases are tagged and entered into the system upon receipt rather than doing so as part of year-end procedures. Views of Responsible Officials and Planned Corrective Action: Based on the delay in finalizing the fiscal 2018 audit, the 2019 assets were not tagged in a timely fashion. Fixed assets purchased in fiscal 2019 have been tagged as of the completion of the 2019 audit. The first quarter 2020 fixed assets are being compiled now and we expect this process to remain timely going forward.

2019-004 Ineffective Internal Controls Over Reporting Criteria: When reporting expenditures to awarding agencies, amounts reported must be supported by the underlying records of the grantee. Condition: Reimbursement requests submitted to the State of Maryland (Maryland State Department of Education), the awarding agency, did not agree to and could not be reconciled to the underlying accounting records. Cause: Due to a lack of understanding and oversight, the reimbursement requests and associated reports did not agree to the underlying accounting records. Effect: Reimbursement requests could include costs that had not been expended prior to making the request. Alternatively, reimbursement requests could exclude expenditures to which the grantee is otherwise entitled. Repeat Finding: This finding is a not repeat of a finding from the prior year audit. Recommendation: We recommend that records be maintained indicating agreement or reconcilement of the monthly reimbursement requests to the underlying account records. We further recommend that the reimbursement requests and related supporting documentation be reviewed by management prior to submission. Views of Responsible Officials and Planned Corrective Action: The Grant Accountant position will maintain a reconcilement of monthly reimbursement requests that matches the underlying account records going forward. These requests will be approved by the Asst. Finance Supervisor or CFO to ensure agreement prior to submission.

2019-005 Lack of Written Procurement Policies as Required by the Uniform Guidance Criteria: Per the Uniform Guidance, recipients of federal awards are required to adopt certain written policies including procurement policies which comply with the requirements enumerated in the Uniform Guidance. Condition: Upon review of the Board?s policy related to federal awards, it was noted that the procurement section of the policy did not meet the requirements of the Uniform Guidance. Cause: The Procurement of Goods and Services to Implement Federal Awards section of the policy in effect as of June 30, 2019, reiterates a portion of the Allowability of Costs Related to Federal Awards section. The Procurement section does not include any of the requirements of the Uniform Guidance as relates to the procurement standards. The exclusion of these requirements appears to be a clerical error as the information contained in the Procurement section is identical to a portion of the Allowability of Costs section. However, the error was not noted with either the first or second reading of the policy prior to adoption. Effect: The Board of Education is not in compliance with the requirements of the Uniform Guidance. Additionally, purchases could be made using federal funds that are not in accordance with the Uniform Guidance. Repeat Finding: This finding is a repeat of a finding from the prior year audit. Recommendation: We recommend that the Board of Education be more diligent in the drafting and approval of policies and procedures to ensure that all necessary elements are included and are correctly stated.

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