CARLSBAD MUNICIPAL SCHOOL DISTRICT

2023 – 003 LATE FILING OF DATA COLLECTION FORM U.S. DEPARTMENTS OF EDUCATION Federal Assistance No. 84.425C, D, U, and W COVID-19: Education Stabilization Fund Passthrough Agency: New Mexico Public Education Department Award Period: July 1, 2021 – June 30, 2022 Reporting U.S. DEPARTMENTS OF AGRICULTURE Federal Assistance No. 10.553 and 10.555 Child Nutrition Cluster Passthrough Agency: New Mexico Public Education Department Award Period: July 1, 2021 – June 30, 2022 Reporting Condition: The June 30, 2022 audit report and data collection form were not sent to the Federal Audit Clearinghouse before the due date of either 30 days after the release date of the audit report or nine months after the year end (March 30, 2023). The audit report was released from the New Mexico State Auditor on May 14, 2023. The audit report and data collection form were certified and submitted on July 10, 2023. Criteria: CODE OF FEDERAL REGULATIONS Title 2 Grants and Agreements: § 200.512 Report Submission The audit must be completed and the data collection form and reporting package 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. Effect or potential effect: The report was not available for the filing of the Federal Clearing House report on a timely basis and the District was not incompliance with the reporting requirements of the Uniform Guidance. Questioned Cost: N/A Cause: The completion and submission of the federal reporting package was not done on time due to the audit not be completed in time to allow for the filing of the data collection by March 30, 2023. Recommendation: Management should make the audit a high priority and develop a system of monitoring to ensure that the audit is progressing as expected. Audit documentation should be provided accurate, complete, and timely in order to facilitate a timely completion of the audit. Management should also consider having audit procedures performed, where appropriate, prior to the yearend in order to move up the start time of the audit and increasing the chance of an earlier completion.

2022-001 ? Suspension and Debarment - Significant Deficiency Federal Program Information: Funding Agency: Department of Agriculture Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.559 Pass Through Award Number: 21000 Pass Through Entity: State of NM PED Award Year: 2022 Condition: Both samples selected for testing vendor eligibility on sam.gov, we noted the District did not have documentation to support that a review was taken place on vendor eligibility. Per 2 CFR section 200.303 ? Internal Controls ? The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non- Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Questioned costs: No questioned costs identified. Effect: If a vendor has been disbarred from receiving Federal funds, the Organization may be liable to pay for the amount and not be reimbursed. Cause: The District did not follow proper Federal policies related to verification of vendors from the excluded parties list system. Auditors? Recommendation: The auditor recommends that the District verify that all vendors are not listed on the excluded parties list system by performing a search on sam.gov and maintaining the results of such search in the vendor?s file. Views of Responsible Officials of Auditee: During the 2021-22 audit, the documentation to support vendor eligibility was not in the vendor?s paperwork for verification. The current process for vendor verification requires a New Vendor Form, a current W-9 Form, Sam.Gov verification of the vendor?s registration status, and an IRS TIN Match, a requirement implemented in FY 2021-22. All of the information obtained is then filed in a vendor file. To avoid any future deficiency, the Purchasing Department will submit a Sam.Gov verification of all vendors that will be utilizing federal funds.

2022-002 ? Internal Controls over Compliance with Payroll Disbursements ? Significant Deficiency Federal Program Information: Funding Agency: Department of Agriculture Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.559 Pass Through Award Number: 21000 Pass Through Entity: State of NM PED Award Year: 2022 Condition: 2 out of 40 samples tested, the employees were not paid based on the approved salary schedule. Criteria: Per 2 CFR section 200.430(i) ? Compensation ? personal services ? Standards for Documentation of Personnel Expenses, 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; (vii) Budget estimates (i.e. estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards. Per 2 CFR section 200.303 ? Internal Controls ? The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non- Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Effect: The District may unintentionally expense employee?s salary out of the Child Nutrition Cluster funding that does not qualify for Child Nutrition funding or more than what is applicable for the work performed by that employee for Child Nutrition program purposes. Cause: The District did not have proper controls in place to verify that employees were paid based on an approved salary. Auditors? Recommendation: The auditor recommends that the District implement controls for documenting and retaining information to indicate the District follows the requirements over 2 CFR section 200.430(i). Views of Responsible Officials of Auditee: The district will expand the internal controls over the timekeeping and payroll processes by requiring all employee pay applications for the Child Nutrition program be reviewed and approved by the Human Resources Department. A schedule of Pay Rates will be created and submitted to the Board of Education for formal approval, along with the other Salary Schedules approved with the annual budget. In addition, the district is moving to an electronic timekeeping system that will eliminate the use of paper timesheets that must be manually processed for payroll purposes. All Board approved pay rates will be programmed into the electronic timekeeping system so that the need for manual pay rate entry and gross pay calculations will be eliminated.

2021-004 ? Internal Controls over Compliance with Payroll Disbursements - Significant Deficiency Federal Program Information: Funding Agency: Department of Agriculture Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.559 Pass Through Award Number: 21000 Pass Through Entity: State of NM PED Award Year: 2021 Condition: The following items were noted in during audit procedures: 1 out of 40 samples tested, the District did not retain a timesheet for one employee to verify the timesheet was reviewed and approved by Management. 7 out of 40 samples tested, the District did have proper documentation on approvals of substitute teachers wage rates. The sample was not statistically valid. Criteria: Per 2 CFR section 200.430(i) ? Compensation ? personal services ? Standards for Documentation of Personnel Expenses, 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; (vii) Budget estimates (i.e. estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.Per 2 CFR section 200.303 ? Internal Controls ? The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non- Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Questioned costs: No questioned costs identified. Effect: The District may unintentionally expense employee?s salary out of the Child Nutrition Cluster funding that does not qualify for Child Nutrition funding or more than what is applicable for the work performed by that employee for Child Nutrition program purposes. Cause: The District did not have proper controls in place to verify that documentation was maintained to indicate the employee?s time and effort for Child Nutrition. Auditors? Recommendation: The auditor recommends that the District implement controls for documenting and retaining information to indicate the District follows the requirements over 2 CFR section 200.430(i). Views of Responsible Officials of Auditee: The District is seeking options for an electronic timekeeping system that will integrate with the InfiniteVISIONS Financial Management System and will support employee work time entry, duty assignment pay linked to the appropriate account coding for the assignment, approved pay rates linked to the duty assignment, electronic data routing from employee to supervisor to admin for review and approval and data transfer for payroll disbursement. Due Date for Completion: December 31, 2022 Responsible Party: Director of Human Resources and Director of Finance

2020-008 (PREVIOUSLY REPORTED AS 2018-016) STUDENT NUTRITION - VERIFICATION (DISTRICT) TYPE OF FINDING: Significant Deficiency / Non-compliance Federal program information: Funding agency: U.S. Department of Agriculture Title: National School Lunch Program, School Breakfast CFDA Number: 10.555, 10.553 CONDITION During our limited testing of 7 applications selected for verification in our attempt to clear the prior finding, the calculation of gross income was not completed properly on two applications, resulting in three students being moved to reduced price meals when they may have continued to qualify for free meals. In both cases, additional follow up was needed to fully determine the family income as the information provided did not reflect the annual earnings. The pay stubs showed year-to-date income, but it was less than the current pay multiplied by pay periods for the year. The District determining if there was another employer for part of the year would have provided support for the changes made. Follow up may have confirmed that the student should have remained in the free category if there was no additional employment during the year. The differences noted in the verification testing are more fully described below: - Application 5294 Verification - The result of the verification moved two students to reduced meals when they may have been allowed to remain in the free category. The pay stub submitted for verification had year-to-date income that was well below the limit. The weekly pay was used to determine the yearly pay. Further review would have determined that the work was not for the full year and the household should have been asked to provide more information on income to support the District?s classification. Without follow up, the information submitted should have left the students in the free category. - Application 5755 Verification - The result of the verification moved one student to reduced meals when they may have been allowed to remain in the free category. The income as the result of the verification was significantly higher than the original application. The pay stub reflected year to date earnings far less than the District determined amount. Follow up was needed to determine if there was other income for the household for the year. The District made significant improvements in this area from FY19. During our testing of eligibility, there were no issues discovered. CRITERIA Children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or a reduced price. By November 15 of each school year, the District must verify the current free and reduced-price eligibility of households from a sample of applications that it has approved for free and reduced-price meals and place them in the correct category. Earnings from work include salary (or wages) and cash bonuses. Per CFR 245 6a (c), there is a verification requirement. Per the Eligibility Manual for School Meals Determining and Verifying Eligibility, the National School Lunch Act requires Districts to conduct verification follow-up activities if needed. The District must make at least one attempt to contact the household...if incomplete or ambiguous responses do not permit the District to resolve children?s eligibility for free and reduced-price meals. QUESTIONED COSTS None EFFECT The District is not in compliance with program requirements. The result of not calculating income properly for verifications is improper classifications and students usually receiving benefits of the Federal program in excess of what they are eligible for. In these cases, the households were subjected to additional costs for meals when they should not have had to pay these costs. The proper use of Federal money in this program is dependent on District?s correct calculations of incomes and following up with households as necessary during the eligibility and verification processes. CAUSE The District?s non-compliance in this area resulted from not recalculating an annual amount in verifications of these households. There were some households where this additional step was completed. If that process had been completed for these applications, the District would have seen that the full picture was not provided and that follow up was needed to determine the true household income. RECOMMENDATION We recommend the District continue to enhance its procedures to ensure verification calculations are correct. The District needs to ensure it uses all information provided as part of the verification process and request additional information if needed. Regular pay from pays stubs provided should be compared to the year-to-date amount, and if they do not match, the District needs to follow up to get to the correct calculation and classification. The calculations should be reviewed by someone other than the preparer as a good practice to catch potential errors and get the students properly classified and reduce the chance of repeating this finding in the future.

2019-009 (PREVIOUSLY REPORTED AS 2018-016) STUDENT NUTRITION - VERIFICATION AND ELIGIBILITY (REPEATED AND MODIFIED) TYPE OF FINDING: Significant Deficiency / Non-compliance Federal program information: Funding agency: U.S. Department of Agriculture Title: National School Lunch Program, School Breakfast CFDA Number: 10.555, 10.553 CONDITION During our testing of 40 applications for eligibility, there were two households whose information scanned into the computer had incorrect amounts or household member errors that were not caught during review. The auditor also noted one questionable amount for a household income that potentially should have been flagged for verification. During testing of the 27 applications selected for verification, the calculation of gross income was not completed properly on one application, resulting in two students receiving reduced meals when they should not have. In addition, one verification reported significantly lower income for verification and different income recipients and should have resulted in additional follow up with the household. The differences noted in both the eligibility and verification testing are more fully described below: ? Household 419 Eligibility - the application flagged one family member was left off the household count. This did not affect the classification for these students, but could result in a family not receiving benefits that they are eligible for. ? Household 1183 Eligibility - the application was flagged as the result for income was different than the application. This did not affect the classification for the students but could result in a family receiving benefits not eligible for, or not receiving benefit level they are eligible for. ? Household 1263 Verification - The pay stub submitted for verification had year-to-date income that exceeded the limit. Commission, and bonuses were not included in the calculation of gross pay resulting in two students continuing to receive reduced meals for the year when they should have been charged full price. ? Household 1515 Eligibility - Application resulted three students classified as free. The income amount for a family of five appeared small to the auditor based on the address for the application. ? Household 2208 Verification - The result of the verification allowed two students to remain in the free category. The income as the result of the verification was significantly lower than the original application. The members reporting income also changed from application to verification. The District made significant improvements in this area from FY18. CRITERIA Children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or a reduced price. By November 15th of each school year, the District must verify the current free and reduced price eligibility of households from a sample of applications that it has approved for free and reduced price meals and place them in the correct category. Earnings from work include salary (or wages) and cash bonuses. Per CFR 245 6a (c) (7), In addition to the required verification sample, the District must verify any questionable applications and should, on a case-by-case basis when the District is aware of additional income or persons in the household, verify any application for cause such as an application on which a household reports zero income. The District has not made improvements over ?verification and eligibility? from fiscal year 2018. QUESTIONED COSTS None EFFECT The District is not in compliance with program requirements. By not calculating income properly for verifications, students? eligibility status is incorrect resulting in improper classifications and students receiving benefits of the Federal program in excess of what they are eligible for. The proper use of Federal money in this program is dependent on District?s correct calculations of income, and following up on unusual applications when allowable by law. CAUSE The District?s non-compliance in this area resulted from missing the proper amount for verification on one application, and not properly reviewing the scanned applications to assure the information transitions correctly. Verifications for cause are an option available to the District for questionable applications RECOMMENDATION We recommend the District enhance its procedures to ensure verification calculations are correct. The District needs to ensure it uses all information provided as part of the verification process. Regular pay should be calculated for the year, and then the District needs include overtime and bonuses to get to a gross amount. In situations where the verification amount for income is significantly less than what was on the application, follow up should occur to determine why. MANAGEMENT RESPONSE Corrective Action: The District will review the procedures used to ensure that the verification calculations for program eligibility are met. Any participant in the program who is determined to be ineligible through either the eligibility or verification processes for free or reduced meals will be moved to the correct payment category and the District will revise future billings to the National School Lunch Program accordingly. Due Date of Completion: Immediate Responsible Party: Food Service Director

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