NOXUBEE COUNTY SCHOOL DISTRICTLocal Government

Section III: Federal Award Findings and Questioned Costs Material Weakness/Material Non-compliance 2022-001 Finding Internal Controls Surrounding Payroll Expenditures Program: COVID-19 ? Elementary & Secondary School Emergency Relief II (ESSER) Program Assistance Listing Number: 84.425D Compliance Requirement: Allowable Cost Repeat Finding: None Criteria: According to the U.S. Department of Education under the American Rescue Plan (ARP) Act of 2021, Public Law 117-2, enacted on March 11, 2021 ESSER funds may be used for other activities that are necessary to maintain operation of a continuity of and services, including continuing to employ existing or hiring new LEA and school staff. Specifically, it does not identify hazard payments, bonuses, or premium payments to employees as eligible use of funds. Article 4 Section 96 of the Mississippi State Constitution prohibits extra compensation (bonuses) to any public employee. According to the AG opinion no. 2020-00144 ?hazard pay? must be ?(1) contracted for between the parties or with the employee prior to the date when services are to be performed; (2) determined in accordance with objective standards of measurement; and (3) earned by personal services performed by the employees.? Condition: During our testing of payroll expenditures, it was noted that all employees received a one time $1,700 payment at the end of the fiscal year titled ?hazard pay? to recognize efforts of employees to support students? health, safety, and academic gains during the COVID pandemic. Cause: The payment did not comply with the criteria referenced. The payment was not properly board approved prior to services performed and the employees did not perform additional services or jobs to earn the payment that could be recognized and measured. Effect: This could cause payroll expenditures to be misspent according to the ESSER II federal grant and Article 4 Section 96 of the Mississippi State Constitution. Questioned Cost: $398,951 ? estimated based on 218 employees pulled from the MDES quarterly report plus applicable payroll related taxes. Recommendation: The district should comply with the ESSER II federal grant based on the eligible use of funds outlined and Article 4 Section 96 of the Mississippi State Constitution. The district should not provide hazard payments to staff with federal funds. Additional payments should be board approved prior to services performed and employees should perform additional services that can be measured to earn the payment. Response: Please refer to the Auditee?s Corrective Action Plan beginning on page 73

Significant Deficiency Finding 2021-002 Weaknesses in controls surrounding accounting for indirect cost in federal grants. Program: U. S. Department of Education Passed-through the Mississippi Department of Education Child Nutrition Cluster CFDA# 10.555; 10.559 Compliance requirement: Allowable Cost/Cost Principles Criteria: Management is responsible for establishing a proper internal control system to ensure adequate financial accountability and safeguarding of the federal program assets. The district is responsible for determining the proper amount of indirect cost for the program. Condition: During fieldwork, we noted the following conditions: (1) The district made an error when calculating indirect cost for the Fiscal Year 2021. (2) The district did not reduce expenditures by the amount of food purchases when determining total expenditures allowed for indirect cost. Context: During the course of the audit, we noted that the accounting system reflected indirect cost charges that were excessive of the allowable amount for the Fiscal Year 2021. Questioned Costs: $52,118 Cause: Lack of adequate controls to ensure that the proper calculation was done when determining the allowable amount to take as an indirect cost.. Effect: As a result, the school district did not follow the guidance with the federal regulations and could result in repaying the Mississippi Department of Education for excess indirect cost received during the year. Recommendation: The school district should develop policies and procedures to ensure that the accounting system reflects the federal guidance for calculating indirect cost. Views of Responsible Officials The district will ensure that all federal programs follow the proper federal guidance when calculating indirect cost.

Material Weakness 2019-005 Finding Payroll expenditures should be supported by adequate documentation and approval. Program: Title I grant to local educational agencies, CFDA # 84.010 Child Nutrition Cluster, CFDA # 10.553; 10.555, 10.559 Criteria: Management is responsible for ensuring that all payroll expenditures made by the district are adequately documented and approved by the governing board. Condition: We noted the following items while testing payroll expenditures: Twenty employees out the twenty employees tested were found to not be approved in board minutes and no support the governing board approved the staff or their salaries for the fiscal year 2019. Cause: The district did not have the proper controls and procedures in place to ensure employees and applicable wages are properly board approved. Controls were also not in place to ensure that all approvals were properly recorded accurately in the minutes. Effect: Omitting documentation of approval of employee?s compensation from the board minutes could result in payments of unauthorized amounts or employee?s Recommendation: We recommend the district implement procedures and internal controls to ensure that the school board approve all salaries including supplements or additional time paid to district employees. View of Responsible Officials: The district will implement controls to ensure that all employees are approved and documented within the board minutes.

2019-006 Finding Repeat finding from 2018-002 Internal controls surrounding special education cash management principles should be strengthened. Program: Title I grant to local educational agencies, CFDA # 84.010 Education for Homeless Children and Youth, CFDA # 84.196 Rural Education CFDA # 84.358 Passed-through the Mississippi Department of Education Compliance Requirement: Cash Management Questioned Cost: $31,762 Criteria: Management is responsible for complying with the requirements of the Mississippi Department of Education Special Education Policy and Procedures Manual, which recommends that expenditures should be expended before the reimbursements are requested. Condition: We noted the following items during our cash management review: 1. The cash balance was excessive for Title I local educational agencies by $17,792 in the allocation of funds to the district for reimbursement of expenditures that had not been expended by the district. These funds have been carried forward from a previous period. 2. The cash balance was excessive for the Education for Homeless Children and Youth by $10,158 in the allocation of funds to the district for reimbursement of expenditures that had not been expended by the district. 3. The cash balance was excessive for the Rural Education by $3,812 in the allocation of funds to the district for reimbursement of expenditures that had not been expended by the district. Cause: Improper internal controls resulted in the district not requesting reimbursements accurately. Effect: By requiring more than one staff member to review the reimbursement request reduces the risk of fraud and errors occurring and not being detected within a timely period. Improper internal controls concerning grant funding allocations could result in questioned cost by the federal agencies. Recommendation: The district should implement stronger internal controls to ensure that all reimbursements are requested accurately in each area when the expenditure is actually expended by the district. View of Responsible Officials: The district will implement a better system of internal controls to prevent this issue in the future.

2019-007 Finding Internal controls over reporting Child Nutrition Program: Child Nutrition Cluster CFDA # 10.553, 10.555 & 10.559 Compliance Requirement: Reporting Criteria: Management is responsible for complying with the requirements of the Mississippi Department of Education Child Nutrition Programs Policy and Procedures Manual, which requires that the monthly claims forms be received by the 10th day of the month following the reporting month. Condition: One of ten reporting months were filed after the 10th of the following month. Adult sales were not being recorded or reported by the district. Cause: Improper internal controls resulted in the district not requesting reimbursements accurately and timely. Effect: By requiring more than one staff member to review the reimbursement request reduces the risk of fraud and errors occurring and not being detected within a timely period. Improper internal controls concerning reporting could result in questioned cost by the federal agencies. Recommendation: The district should implement policies and procedures to ensure compliance with the reporting requirements. View of Responsible Officials: The district will implement a better system of internal controls to prevent this issue in the future.

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