PENASCO INDEPENDENT SCHOOL DISTRICT

2024-009 (2022-006)CONTROLS OVER PURCHASES - EDUCATIONAL STABILIZATION FUND GRANT (MODIFIED AND REPEATED) Funding agency:U.S. Department of Education, passed through the New Mexico Public Education Department Federal Program Title and Assistance Listing Number: COVID-19 Education Stabilization Fund - 84.425 Federal Award ID Number: 5425D210023 Award Year:July 1, 2023 to June 30, 2024 Type of Finding: Significant Deficiency Compliance Area: Allowable costs and allowable activities Question Costs: None Condition We tested 27 operating disbursements and noted that four disbursements were missing purchase orders. After-the-fact purchase orders could not be generated from the previous general ledger package. Management's Progress in 2024: Management did not make improvement over this condition from the prior year. Criteria New Mexico Public Education Department PSAB Supplement 13, Purchasing. Processing takes place after the purchase orders are created and approved. Vendor invoices are received and reviewed by the accounting department. The invoice is compared to the purchase order. Disbursement approval is separate of general ledger approval. Effect The District is not in compliance with the New Mexico Public Education Department's purchasing guidance. Cause Management did not appropriately plan a certain purchase to ensure that a purchase order generated at the start of the purchase.

2024-010 HOURLY TIMESHEETS - NO PREPARER OR APPROVER SIGNATURES - EDUCATIONAL STABILIZATION FUND GRANT Funding agency:U.S. Department of Education, passed through the New Mexico Public Education Department Federal Program Title and Assistance Listing Number: COVID-19 Education Stabilization Fund - 84.425 Federal Award ID Number: 5425D210023 Award Year:July 1, 2023 to June 30, 2024 Type of Finding: Significant Deficiency Compliance Area: Allowable costs and allowable activities Question Costs: None Condition We tested 10 payroll disbursements and found that four (4) timesheets for hourly employees were missing employee's signature and supervisor's approval. However, no discrepancies in pay amounts were identified. The requirement for signed timesheets was discontinued at the start of FY22. Further control deficiencies in the HR and payroll transaction cycles are detailed in Financial Statement Findings 2024-003 and 2024-007. Criteria 2 CFR § 200.430 (g) 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 that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (iii) Reasonably reflect the total activity for which the employee is compensated by the recipient or subrecipient. New Mexico Department of Public Education's (PED) Manual of Procedures, PSAB Supplement 14, Payroll: Timecards are always signed, a procedure exists to verify time or changes, supervisor signature, etc. Effect Without signed timesheets, the District has a limited capacity to verify the accuracy and approval of hours worked, increasing the risk of unauthorized payroll payments or unrecorded errors. This control lapse also indicates a growing weakness in payroll oversight, potentially undermining the integrity of the District's internal control environment over payroll processing. Cause The District discontinued the process at the beginning of FY22, and despite management's efforts to implement timesheet controls in FY24, it was not consistently enforced throughout the fiscal year.

2023-009 (2022-006) CONTROLS OVER PURCHASES - EDUCATIONAL STABILIZATION FUND GRANT (MODIFIED AND REPEATED) Federal Program Information Type of Finding: Significant Deficiency Compliance Areas: Allowable costs and allowable activities Assistance Listings Number: 84.425 Award Period: July 1, 2022 to June 30, 2023 Federal Agency: U.S. Department of Education, passed through the New Mexico Public Education Department Federal Award ID Number: 5425D210023 Program Name: Education Stabilization Fund Questioned Costs: None Condition We tested 25 operating disbursements and noted that one disbursement had the purchase order created after the vendor invoice was created. We also noted two of the invoices did not include written authorization to pay the invoice. Management’s Progress in 2023: Management did not make improvement over this condition from the prior year. Criteria New Mexico Public Education Department PSAB Supplement 13, Purchasing. Processing takes place after the purchase orders are created and approved. Vendor invoices are received and reviewed by the accounting department. The invoice is compared to the purchase order. Disbursement approval is separate of general ledger approval. Cause Management did not appropriately plan a certain purchase to ensure that a purchase order was in place at the start of the purchase. Management did not approve certain payments in writing. Effect The District is not in compliance with the New Mexico Public Education Department’s purchasing guidance.

2022-006 CONTROLS OVER PURCHASES - EDUCATIONAL STABILIZATION FUND GRANT Federal Program Information Type of Finding: Significant Deficiency Compliance Areas: Allowable costs and allowable activities Assistance Listings Number: 84.425 Award Period: July 1, 2021 to June 30, 2022 Program Name: Education Stabilization Fund Questioned Costs: None Condition: We tested 12 operating disbursements and noted that two disbursements had the purchase order created after the vendor invoice was created. We also noted four of the invoices did not include written authorization to pay the invoice. Criteria: New Mexico Public Education Department PSAB Supplement 13, Purchasing. Processing takes place after the purchase orders are created and approved. Vendor invoices are received and reviewed by the accounting department. The invoice is compared to the purchase order. Disbursement approval is separate of general ledger approval. Cause: Management did not appropriately plan a certain purchase to ensure that a purchase order was in place at the start of the purchase. Management did not approve certain payments in writing. Effect: The District is not in compliance with the new Public Education Department?s purchasing guidance. Recommendation: We recommend that the Department follow the guidance in NM PED?s PSAB Supplement 13, Purchasing.