REPORT ON SINGLE AUDIT June 30, 2012
COUNTY OF DENVER AND STATE OF COLORADO TABLE OF CONTENTS Page Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... 1 Independent Auditor s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133... 3 Schedule of Expenditures of Federal Awards... 6 Notes to Schedule of Expenditures of Federal Awards... 10 Schedule of Findings and Questioned Costs... 11 Prior Year Findings and Questioned Costs... 19
CliftonLarsonAllen LLP www.cliftonlarsonallen.com Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Board of Education School District No. 1 in the City and County of Denver and State of Colorado We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of School District No. 1 in the City and County of Denver and State of Colorado (the District) as of and for the year ended June 30, 2012, and have issued our report thereon dated November 14, 2012. Our report includes a reference to other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Other auditors audited the financial statements of the discretely presented component units as described in our report on the District s financial statements. Of the discretely presented component units, only the financial statements of The Odyssey School were audited in accordance with Governmental Auditing Standards. This report does not include the results of the other auditors testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Internal Control Over Financial Reporting Management of the District is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the entity's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 1
Compliance and Other Matters As part of obtaining reasonable assurance about whether the District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted a certain other matter that we reported to management of the District in a separate letter dated November 14, 2012. This report is intended solely for the information and use of management, the Finance and Audit Committee, others within the entity, the Board of Education, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. a Greenwood Village, Colorado November 14, 2012 2
CliftonLarsonAllen LLP www.cliftonlarsonallen.com Independent Auditors Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 Board of Education School District No. 1 in the City and County of Denver and State of Colorado Compliance We have audited the compliance of School District No. 1 in the City and County of Denver and State of Colorado (the District) with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2012. The District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the District's management. Our responsibility is to express an opinion on the District's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A- 133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the District's compliance with those requirements. In our opinion, the District complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2012. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements, which are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs as items 2012-01, 2012-02, 2012-04, and 2012-05. 3
Internal Control Over Compliance The management of the District is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the District's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the entity's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies as described in the accompanying schedule of findings and questioned costs as items 2012-01, 2012-02, 2012-03, 2012-04 and 2012-05. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Schedule of Expenditures of Federal Awards We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the District as of and for the year ended June 30, 2012, and have issued our report thereon dated November 14, 2012. We did not audit the financial statements of the discretely presented component units. Our audit was conducted for the purpose of forming our opinions on the financial statements that collectively comprise the District's basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the basic financial statements. The schedule of expenditures of federal awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling 4
such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The District s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the District s responses and, accordingly, we express no opinion on them. This report is intended solely for the information and use of management, the Finance and Audit Committee, others within the entity, the Board of Education, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. a Greenwood Village, Colorado December 7, 2012 (except for the Schedule of Federal Awards, as to which the Date is November 14, 2012) 5
COUNTY OF DENVER AND STATE OF COLORADO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2012 Cash Catalog of Expended Federal and Domestic Commodities Grant Title Assistance Used U.S. DEPARTMENT OF EDUCATION: Direct Programs: Indian Education (4060) 84.060A 169,429 Pell Grant (5063) 84.063 2,611,766 Safe and Drug Free Schools (7184) 84.184E 128,638 Elementary and Secondary School Counseling Demonstration Program (5215E) 84.215E 95,549 Fund for the Improvement of Education (5215F) 84.215F 481,064 Fund for the Improvement of Education (6215L) 84.215L 105,742 Foreign Languages Assistance (5293) 84.293A 249,877 Gaining Early Awareness and Readiness for Undergraduate Programs 84.334A 287,615 Early Reading First (5359, 6359) 84.359B 831,076 Urban Principal Leadership Program (5363) 84.363A 742,500 Teacher Incentive Fund (TIF) (5374) * 84.374A 1,862,544 Total Direct 7,565,800 Passed Through Colorado Department of Education: LSTA State Library Program (7310) 45.310 1,495 Education and Human Resources (8076) 47.076 11,193 Adult Education and Family Literacy Act (AEFLA) Expansion Grant (6002) 84.002A 291,776 Title I [4010 (4008, 4009, 4010,7010)] * 84.010 48,541,411 Title I - Improving Basic Programs (5010) * 84.010 752,707 Title I - Part C - Migrant Education (4011) 84.011A 73,135 Title VI - IDEA B Summer School Special Education (4027) * 84.027 16,707,680 PL99-457 Pre-School (4173) * 84.173 395,836 Safe and Drug Free Schools (4186) 84.186 18,752 Education For Homeless Children and Youth (5196) * 84.196 44,001 Charter Schools (5282) 84.282 3,573,691 21st Century Community Learning Center (5287, 6287, 7287) 84.287 1,585,837 21st Century Community Learning Center (8287) 84.287C 50,099 Title II - D Enhancing Education Through Technology (4318) * 84.318 50,570 Title I-G AP for Disadvantaged (5330) 84.330 18,234 Drop Out Prevention & Student Engagement (5360) 84.360A 154,746 Title III - English Language Acquisition (4365) 84.365 3,572,279 Title III - English Language Acquisition (5365) 84.365A 344 Title III - English Language Acquisition (7365) 84.365 294,840 Title II - B Math and Science Partnership Program (5366) 84.366 354,118 Title II - A Teacher and Principal Training and Recruiting Fund (4367) 84.367 4,984,721 School Improvement Grant (5377, 6377, 7377) * 84.377 211,873 Education Jobs Fund (4410) 84.410 503,143 Total Colorado Department of Education 82,192,481 District project codes in parentheses * Represents those programs that are considered to be clusters of programs (Continued) 6
COUNTY OF DENVER AND STATE OF COLORADO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2012 Cash Catalog of Expended Federal and Domestic Commodities Grant Title Assistance Used American Recovery and Reinvestment Act (ARRA): Direct Programs: (Project Code) ARRA-Innovation Fund (4396) 84.396B 3,854,416 ARRA-Teacher Quality Partnerships (5405) * 84.405A 1,516,860 Total ARRA Direct 5,371,276 Passed Through Colorado Department of Education: ARRA-Title II (Formula) (4386) * 84.386 48,880 ARRA-Title II - D Ed Tech (Competitive) (5386) * 84.386 39,030 ARRA-McKinney-Vento Homeless (5387) * 84.387 1,991 ARRA-Tiered Intervention Grant (7388) * 84.388 5,420,442 ARRA-IDEA, Part B (4391) * 84.391 517,516 ARRA-IDEA, Preschool (4392) * 84.392 34,813 Total ARRA Colorado Department of Education 6,062,672 Passed Through City and County of Denver - Mayor's Office for Education and Children: ARRA-Head Start (8708) * 93.708 30,633 Total U.S. American Recovery and Reinvestment Act (ARRA) 11,464,581 Passed Through Colorado Community College and Occupational Education: Perkins - Post Secondary (4048, 5048) 84.048 1,283,208 Passed Through Colorado Department of Human Services: School to Work Alliance Program (SWAP) (5126) 84.126 610,306 Passed Through Metropolitan State College of Denver: Secondary Teacher Enhancement Project (STEP) (4336) 84.336B 3 Total U.S. Department of Education 103,116,380 District project codes in parentheses * Represents those programs that are considered to be clusters of programs (Continued) 7
COUNTY OF DENVER AND STATE OF COLORADO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2012 Cash Catalog of Expended Federal and Domestic Commodities Grant Title Assistance Used U.S. DEPARTMENT OF AGRICULTURE: Passed Through Colorado Department of Education: School Breakfast Program (4553) * 10.553 5,188,734 National School Lunch Program (4555) * 10.555 20,919,578 Summer Food Service Program for Children (4559) * 10.559 561,841 Team Nutrition Grants (4574) 10.574 21,294 Federal Fresh Fruit and Vegetable Program (4582) 10.582 1,161,949 Total Colorado Department of Education 27,853,396 Passed Through Colorado Department of Public Health and Environment: Child/Adult Care Food Program (4558) 10.588 190,842 Total U.S. Department of Agriculture 28,044,238 U.S. DEPARTMENT OF DEFENSE: Direct Program: JROTC Career Academy (9001) 12.001 989,899 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT: Passed Through City and County of Denver - Office of Economic Development: Community Development Entitlement Grant (8218, 7218) 14.218 202,327 NATIONAL SCIENCE FOUNDATION: Passed Through Denver Museum of Nature and Science National Science Foundation (NSF) (7076) 47.076 20,664 U.S. DEPARTMENT OF ENERGY: Passed Through Governor's Energy Office: Office of Energy Conservation (7041) 81.041 14,804 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES: Passed Through City and County of Denver: Head Start (8600) * 93.600 1,534,366 Passed Through State of Colorado: Refugee and Entrant Assistance State Administered Program (7566) 93.566 372,146 Refugee and Entrant Assistance Targeted Assistance Grants (7584) 93.584 61,158 Total U.S. Department of Health and Human Services 1,967,670 District project codes in parentheses * Represents those programs that are considered to be clusters of programs (Continued) 8
U.S. DEPARTMENT OF LABOR: CORPORATION FOR NATIONAL AND COMMUNITY SERVICE: COUNTY OF DENVER AND STATE OF COLORADO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2012 Cash Catalog of Expended Federal and Domestic Commodities Grant Title Assistance Used Passed Through Colorado Governor's Commission on Community Service: AmeriCorps (7006) 94.006 295,719 Total U.S. Department of Labor 295,719 U.S. DEPARTMENT OF TRANSPORTATION: Passed Through Regional Air Quality Council: Highway Planning and Construction (7205) 20.205 16,202 TOTAL EXPENDITURES OF FEDERAL AWARDS $ 134,667,903 District project codes in parentheses * Represents those programs that are considered to be clusters of programs 9
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS NOTE 1 - BASIS OF ACCOUNTING The schedule of expenditures of federal awards is prepared on the modified accrual basis of accounting. Expenditures are recognized when they become a demand on current available financial resources. Encumbrances are used during the year for budgetary control purposes and lapse at fiscal year end. NOTE 2 - NONCASH AWARDS The District receives food commodities from the U.S. Department of Agriculture for use in its food service program. The commodities are recognized as revenue when received. The commodities are recognized as expenditures when used by the schools. The majority of the commodities are stored at the individual schools instead of a central warehouse. As such, the District has determined that the title to the commodities passes to the District upon receipt of the commodities. Since the District has received title to the commodities, the unused commodities are not reflected as deferred revenue. The commodities are reported under the National School Lunch Program (CFDA 10.555). The District recognized noncash awards of $1,264,771 for the year ended June 30, 2012. 10
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Section I Summary of Auditor s Results Financial Statements Type of auditor s report issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? yes none reported Significant deficiencies identified that are not considered to be material weaknesses? yes none reported Noncompliance material to financial statements noted? yes no Federal Awards Internal control over major programs: Material weakness(es) identified? yes none reported Significant deficiencies identified that are not considered to be material weakness(es)? yes none reported Type of auditor s report issued on compliance for major program: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? yes no 11
Identification of major programs: SCHEDULE OF FINDINGS AND QUESTIONED COSTS CFDA Number(s) 84.010, 84.389 84.410 84.396 84.365 84.282 84.367 84.377, 84.388 93.600, 93.708 Name of Federal Program or Cluster Title I Cluster Education Jobs Funds ARRA Innovation Fund Title III Charter Schools Title II Part A School Improvement Grant Cluster (SIG) Head Start Dollar threshold used to distinguish between type A and type B programs $3,000,000 Auditee qualified as low-risk auditee? yes no 12
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Section II Financial Statement Findings There were no findings noted for the year ended June 30, 2012. Section III Federal Award Findings and Questioned Costs Finding 2012-01 CFDA: Head Start, 93.600, 93.708 Eligibility Significant Deficiency, Noncompliance Criteria: The OMB Circular A-133 Compliance Supplement (related to the Head Start Cluster) requires the Head Start grantee to verify family income before determining that a child is income eligible. Verification must include examination of either pay stubs, W-2 forms, Tax Form 1040, written statement from employers, or documentation showing current status as recipient of public assistance. In such instances where there is no family income documentation available, the District should document in the file the process used to reach the conclusion that the child is an income-eligible child. The District is also required to establish internal controls to review and approve the recipients applications. Condition: The District accepts income affidavits from Head Start applicants to satisfy the income verification requirement. There is no documentation in the file evidencing the process by which the District assesses the child as an income-eligible child. It was also noted the applications are not reviewed by anyone except the individual preparing the application. Questioned Costs: None. Context: For 8 of the 40 recipients tested, we noted the only income verification performed by the District was receipt of an income affidavit signed by the applicant. Cause: The District s policy is to obtain an income affidavit when other documented verification of income cannot be obtained. Effect: The District is not in compliance with eligibility requirements over Head Start, as there is no evidence to support the process by which a child was determined to be an income-eligible child, when standard income verification documentation is not available. Further, the District has not established a review and approval process to ensure that the application was filled out in compliance with the requirements. Recommendation: We recommend the District continue its practice of first obtaining standard income documentation, as required by the OMB Circular A-133 Compliance Supplement. In circumstances where such income documentation is not available, we recommend the District amend its existing policy, to require documentation in the file evidencing the process by which the District assessed the child as an income-eligible child. The District should also establish a procedure to review and approve the applications to ensure all supporting documentation is in compliance with Federal requirements. 13
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Views of responsible officials and planned corrective actions: The District concurs with the recommendation and will institute an acceptable resolution to this finding no later than March 31, 2013. Responsible Official: Cheryl Caldwell, Director, Early Education. Finding 2012-02 CFDA: Title II - A, 84.367; Title III, 84.365 Allowable Costs Significant Deficiency, Noncompliance Criteria: Per OMB Circular A-87, when employees work solely on a single Federal award or cost objective, charges for their salaries and wages will be supported by periodic certifications that the employees worked solely on that program for the period covered by the certification. These certifications will be prepared at least semi-annually and will be signed by the employee or supervisory official having firsthand knowledge of the work performed by the employee. Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation, and they must reflect an after-the-fact distribution of the actual activity of each employee, must account for the total activity for which each employee is compensated, must be prepared at least monthly and must coincide with one or more pay periods, and must be signed by the employee. Condition: Certain salary and wages charged to the Title II and Title III grants were not supported by time and effort reporting. Questioned Costs: Title II - $16,423 Title III - $13,310 Context: We tested 25 payroll transactions for Title II, noting one transaction that was not supported by time and effort reports. We tested 25 payroll transactions for Title III, noting one transaction that was not supported by time and effort reports. Cause: The two individuals identified above work for charter schools. Such schools do not maintain time and effort certifications as required by OMB Circular A-87. Effect: Salary and wage costs were not fully supported by documentation in accordance with OMB Circular A-87. Recommendation: We recommend the District implement additional monitoring procedures to ensure that all employees charged to the grant have completed time and effort reporting. 14
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Views of responsible officials and planned corrective actions: The District concurs with the recommendation and notes that the exceptions identified in the audit relate to charter schools. Charter schools have payroll systems independent from the District, and must have procedures in place to ensure compliance with federal time and effort reporting requirements. The District will review its communication, training and monitoring of charter schools compliance with these requirements, and will implement appropriate procedures to ensure time and effort compliance requirements are met. Corrective action will be implemented by June 30, 2013. Responsible Official: Nancy Connor, Director, Federal Programs. Finding 2012-03 CFDA: 84.282 Charter School Grant Suspension and Debarment Significant Deficiency Criteria: Per OMB Circular A-133 requirements, when a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity is not suspended or debarred or otherwise excluded. This verification may be accomplished by checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA), collecting a certification from the entity, or adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Condition: We note there are no procedures in place to ensure that purchases made by charters schools are with vendors that were not suspended or debarred. Questioned Costs: None. Context: During our testing of grant expenditures, we noted charter school management was unaware of the requirement to verify that vendors were not suspended or debarred. Cause: The District has policies and procedures to ensure that federally funded purchases are not made from vendors that that have been suspended or debarred by the federal government. However, such procedures relate to the direct District programs only and have not been fully implemented as they relate specifically to charter schools. In addition, there is not an adequate monitoring procedure in place to ensure that all vendors charged to federal grants are not either suspended or debarred (for charter schools). Effect: Purchases of goods or services from suspended or debarred vendors may occur and subsequently be disallowed for federal reimbursement. 15
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Recommendation: We recommend that the District provide additional training to charter schools to ensure that established District policies and procedures related to suspension and debarment are being followed, and implement additional monitoring procedures to ensure that vendors are not either suspended or debarred. Views of responsible officials and planned corrective actions: The District concurs with the recommendation that guidance and training regarding suspension and debarment policies and procedures be provided to charter schools. The District will implement additional monitoring procedures to ensure that charter school vendors are neither suspended nor debarred. Corrective action will be implemented by June 30, 2013. Responsible Official: Nancy Connor, Director, Federal Programs. Finding 2012-04 CFDA: Title I ARRA, Title I Grants to Local Education Agencies 84.010, 84.389; Title II - A, 84.367 Special Tests and Provisions Significant Deficiency, Noncompliance Criteria: The District is required to establish internal controls to review and approve schoolwide plans to ensure that the District is compliant with 34 CFR Section 200.26, Core Elements of a Schoolwide Program. Condition: Of the twelve (12) schoolwide plans tested for controls and compliance, seven (7) schools did not reference transitional plans for assisting preschool children in the successful transition to a schoolwide plan, nine (9) schoolwide plans did not include the requirement to instruct with highly qualified professional staff, three (3) schools did not reference additional support for students experiencing difficulty, two (2) schools did not include the requirement of providing either choice-related transportation or supplemental education services, six (6) schoolwide plan did not include strategies to increase parental involvement, one (1) school did not provide any performance measures, progress monitoring or data analysis, and all twelve (12) plans were not reviewed to ensure that all the necessary requirements were being met. The District s Internal Audit also tested fifteen (15) schoolwide plans, two (2) did not reference the requirement for instruction by highly qualified professional staff, three (3) plans did not reference transition plans for assisting preschool children in the successful transition to the schoolwide program, and one (1) plan did not include strategies to increase parental involvement. Questioned Costs: None. Context: See condition above. 16
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Cause: The District has not established monitoring procedures to ensure that schoolwide plans include all compliance requirements. Effect: Noncompliance with schoolwide plan documentation requirements Recommendation: We recommend that the District establish monitoring procedures to review and approve schoolwide plans on an annual basis to ensure compliance with Federal requirements. Views of responsible officials and planned corrective actions: The District concurs with the recommendation that schoolwide plans be reviewed and monitored annually. As noted in the District s Internal Audit report of September 2011, the District implemented a new review and approval process during the 2011-2012 school year; this revised process was used for creation of the 2012-2013 plans which were drafted in April 2012. As such, this is a timing issue, and we expect this has been fully resolved with the submission of the 2012-2013 schoolwide plans. Responsible Official: Nancy Connor, Director, Federal Programs. Finding 2012-05 CFDA: School Improvement Grant, 84.377, 84.388 Allowable Costs Significant Deficiency, Noncompliance Criteria: OMB Circular A-87 requires that salaries and wages, whether treated as direct or indirect costs, will be based on payroll documented in accordance with generally accepted practices of the governmental unit. Condition: Supporting documentation for a stipend paid for attendance at a professional development event was not provided, as sign in sheets for the respective training sessions could not be located. Questioned Costs: $1,600 Context: We tested 25 payroll transactions, noting two stipend transactions that were not supported by sign in sheets. Cause: The District has not established internal control processes to ensure that all supporting documentation for a program expenditure is maintained, in order to support the cost of the program. Effect: Salary and wage costs were not fully supported by documentation in accordance with OMB Circular A-87. The District was not in compliance with OMB Circular A-87. 17
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Recommendation: We recommend the District implement additional monitoring procedures to ensure all supporting documentation is obtained and properly maintained on file. Views of responsible officials and planned corrective actions: The District concurs with the recommendation. A review of policies and procedures regarding maintenance of adequate supporting documentation when employees attend professional development events will be conducted with Federal Programs staff. Corrective action will be implemented by June 30, 2013. Responsible Official: Nancy Connor, Director, Federal Programs. 18
PRIOR YEAR FINDINGS AND QUESTIONED COSTS Section II Financial Statement Findings Finding 2011-01 Capital Asset Accounting Significant Deficiency Summary: The District did not have a process in place to reconcile capital outlay expenditures of the governmental fund financial statements to capital asset additions reported in the statement of net position and the footnotes. Status: Implemented Section III Federal Award Findings and Questioned Costs Finding 2011-02 CFDA: Title I ARRA, 84.389; ARRA State Fiscal Stabilization Fund 84.394A; ARRA Teacher Incentive Fund, 84.385; Education Jobs Fund, 84.410; Tiered Intervention Grant, 84.388 Reporting Significant Deficiency Summary: The District did not have proper segregation of duties between the initiation of ARRA Section 1512 reports and the review and approval of the reports. Status: Implemented Finding 2011-03 CFDA: Title I ARRA, Title I Grants to Local Education Agencies 84.010, 84.389; Title II - A, 84.367 Special Tests and Provisions Significant Deficiency, Noncompliance Summary: The District did not have a process in place to review and approve schoolwide plans to ensure that the District is compliant with 34 CFR Section 200.26, Core Elements of a Schoolwide Program. Status: This finding has been repeated as 2012-04 19
PRIOR YEAR FINDINGS AND QUESTIONED COSTS Finding 2011-04 CFDA 84.394 State Fiscal Stabilization Fund Period of Availability Significant Deficiency, Noncompliance Summary: The District did not have procedures in place to ensure the costs that were charged to the SFSF grant were within the period of availability. Summary: Implemented Finding 2011-05 CFDA 84.282 Charter School Grant Matching, Level of Effort, Earmarking Significant Deficiency Summary: The District did not have controls in place to ensure that the charter schools do not spend more than 15% of grant funds for initial operational costs associated with the expansion or improvement of the School. Status: Implemented Finding 2011-06 CFDA 84.367 Title II-A; 84.282 Charter School Grant Suspension and Debarment Significant Deficiency Summary: The District did not have procedures in place to ensure that vendors paid out of federal funds were not either suspended or debarred. Status: Partially implemented. The finding has been implemented for CFDA 84.367 Title II-A. Related to CFDA 84.282 Charter School Grant, the finding has been repeated as 2012-03. 20
PRIOR YEAR FINDINGS AND QUESTIONED COSTS Finding 2011-07 CFDA 84.282 Charter School Grant; 84.388 ARRA-Tiered Intervention Grant Allowable Costs Significant Deficiency, Noncompliance Summary: The request for reimbursements from the charter schools did not provided sufficient documentation to be able to determine the cost was allowable under OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments. Status: Implemented Finding 2011-08 CFDA Title I ARRA, Title I Grants to Local Education Agencies 84.010, 84.389; Title II - A, 84.367 Allowable Costs Significant Deficiency, Noncompliance Summary: Salary and wages charged to the Title I and Title I ARRA grants and Title II-A were not supported by time and effort reporting. In addition, procedures were not been established to verify that all salary and wage charges to the grants are supported by time and effort reports as required by OMB Circular A-87. Status: Partially implemented. For Title I this process has been implemented. Time and effort exceptions were noted during payroll testing for Title II-A and Title III, see finding 2012-02. 21