FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Number and Year (or Other Identifying Number): FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Finding: Material Weakness
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals.
Any child enrolled in a participating school or summer camp, or attending a SFSP meal service
site, who meets the applicable program's definition of "child," may receive meals under the applicable
program. In the case of the National School Lunch Program and School Breakfast Program, children
belonging to households meeting nationwide income eligibility requirements may receive meals at no
charge or at a reduced price. Children who have been determined ineligible for free or reduced price school
meals pay the full price, set by the School Food Authority, for their meals. Children attending SFSP meal
service sites receive their meals at no charge. As a general rule, a child's eligibility for free or reduced price
meals under a Child Nutrition Cluster program may be established by the submission of an annual
application or statement which furnishes such information as family income and family size. Local educational
agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the
child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For
a direct certification, annual eligibility determinations are based on the child's household receiving benefits
under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF
program (ALN 93.558). A household may furnish documentation of its participation in one of these programs;
or the school, institution, or sponsor may obtain the information directly from the state or local
agency that administers these programs. Certain foster, runaway, homeless, and migrant children are
categorically eligible for free school lunches and breakfasts. Direct certified households do not need to
complete an application.
The Food Service Director was responsible for reviewing the on-line and paper application eligibility
status and entering the information into the School Corporation's system (Skyward). There was no
evidence of an oversight, review, or approval process to ensure that the income verification, calculations,
and information entered into the Skyward system were accurate and the eligibility status was correct.
In addition, the Food Service Director was responsible for generating and reviewing the Direct
Certification Reports. There was no evidence of an oversight, review, or approval process to ensure that
the Direct Certification Reports were generated and reviewed.
The lack of internal controls was isolated to the fiscal year ended June 30, 2023.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management of what should be done to effect internal controls, and procedures
should consist of actions that would implement these policies.
Effect
Without the proper design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002
Subject: Child Nutrition Cluster - Verification of Free and Reduced Price Lunch Applications
Federal Agency: Department of Agriculture
Federal Program: National School Lunch Program
Assistance Listings Number: 10.555
Federal Award Number and Year (or Other Identifying Number): FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Verification of Free
and Reduced Price Lunch Applications (NSLP)
Audit Findings: Material Weakness, Other Matters
Condition and Context
By November 15 of each school year, the Local Educational Agencies (LEA) must verify the current
free and reduced price eligibility of households selected from a sample of applications that it has approved
for free and reduced price meals, unless the LEA is otherwise exempt from the verification requirement.
The verification sample size is based on the total number of approved applications on file on October 1.
If the LEA performs the verification function it must be in accordance with instructions provided by
the state agency. The LEA must follow up on children whose eligibility status has changed as the result of
verification activities to put them in the correct category.
As instructed, LEAs must select a sample of applications to be verified utilizing one of the following
methods:
a. Standard sample size - The lesser of 3 percent or 3,000 of the approved applications on
file as of October 1, selected from error-prone applications. For this purpose, error prone
applications are those showing household incomes within $100 monthly or $1,200 annually of
the income eligibility guidelines for free and reduced price meals.
b. Alternative sample sizes - 1) The lesser of 3 percent or 3,000 applications selected at
random from approved applications on file as of October 1 of the school year, or (2) The sum
of (a) the lesser of 1 percent of all applications identified as error-prone or 1,000 error-prone
applications, and (b) the lesser of 1/2 of 1 percent of, or 500, approved applications in which
the household provided, in lieu of income information, a case number showing participation in
the SNAP, TANF, or FDPIR.
In accordance with the above guidance, the School Corporation selected a sample of verifications
based on the alternative sample size. As such, the School Corporation was required to review the lesser
of three percent or 3,000 applications selected at random from approved applications on file as of October
1 of the 2022-2023 school year. On October 1, the School Corporation had 178 applications on file and
determined that 6 applications were required to be verified; however, the School Corporation chose to verify
14 applications.
The Food Service Director was responsible for reviewing the applications selected for verification
in fiscal year 2022-2023. A second review was performed by the Assistant Food Service Director as
indicated on the Verification Collection Report. Of the 14 applications verified by the School Corporation,
a sample of 6 applications were selected for testing. The following errors were noted:
(1) For two students, 1 application was to have the eligibility status changed from "Free" to
"Paid"; however, this change was not updated and made in the School Corporation's
system.
(2) For five students, 1 application had the eligibility status of "Reduced" in the School
Corporation's system as of July 18, 2022, which agreed to the income verification.
However, the eligibility status was changed in the School Corporation's system to "Free"
as of August 26, 2022.
The lack of internal controls and noncompliance was isolated to 2022-2023.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
7 CFR 245.6a states in part:
". . . (f) Verification procedures and assistance for households – . . .
(7) Eligibility changes. Based on the verification activities, the local educational agency
shall make appropriate modifications to the eligibility determinations made initially. The
local educational agency must notify the household of any change. Households must
be notified of any reduction in benefits in accordance with paragraph (j) of this section.
Households with reduced benefits or that are longer eligible for free or reduced price
meals must be notified of their right to reapply at any time with documentation of
income or participation in one of the eligible programs in paragraph (a)(1) of this
section. . . .
(j) Adverse action. If verification activities fail to confirm eligibility for free or reduced price
benefits or should the household fail to cooperate with verification efforts, the school or local
educational agency shall reduce or terminate benefits, as applicable, as follows: Ten days
advance notification shall be provided to households that are to receive a reduction or termination
of benefits, prior to the actual reduction or termination. The first day of the 10 day advance
notice period shall be the day the notice is sent. The notice shall advise the household of:
(1) The change;
(2) The reasons for the change;
(3) Notification of the right to appeal and when the appeal must be filed to ensure continued
benefits while awaiting a hearing and decision;
(4) Instructions on how to appeal; and
(5) The right to reapply at any time during the school year. The reasons for ineligibility
shall be properly documented and retained on file at the local educational agency."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, verifications for free and reduced price applications were not appropriately
changed.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure verifications for free and reduced price
applications are appropriately changed.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Number and Year (or Other Identifying Number): FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Finding: Material Weakness
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals.
Any child enrolled in a participating school or summer camp, or attending a SFSP meal service
site, who meets the applicable program's definition of "child," may receive meals under the applicable
program. In the case of the National School Lunch Program and School Breakfast Program, children
belonging to households meeting nationwide income eligibility requirements may receive meals at no
charge or at a reduced price. Children who have been determined ineligible for free or reduced price school
meals pay the full price, set by the School Food Authority, for their meals. Children attending SFSP meal
service sites receive their meals at no charge. As a general rule, a child's eligibility for free or reduced price
meals under a Child Nutrition Cluster program may be established by the submission of an annual
application or statement which furnishes such information as family income and family size. Local educational
agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the
child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For
a direct certification, annual eligibility determinations are based on the child's household receiving benefits
under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF
program (ALN 93.558). A household may furnish documentation of its participation in one of these programs;
or the school, institution, or sponsor may obtain the information directly from the state or local
agency that administers these programs. Certain foster, runaway, homeless, and migrant children are
categorically eligible for free school lunches and breakfasts. Direct certified households do not need to
complete an application.
The Food Service Director was responsible for reviewing the on-line and paper application eligibility
status and entering the information into the School Corporation's system (Skyward). There was no
evidence of an oversight, review, or approval process to ensure that the income verification, calculations,
and information entered into the Skyward system were accurate and the eligibility status was correct.
In addition, the Food Service Director was responsible for generating and reviewing the Direct
Certification Reports. There was no evidence of an oversight, review, or approval process to ensure that
the Direct Certification Reports were generated and reviewed.
The lack of internal controls was isolated to the fiscal year ended June 30, 2023.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management of what should be done to effect internal controls, and procedures
should consist of actions that would implement these policies.
Effect
Without the proper design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Number and Year (or Other Identifying Number): FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Finding: Material Weakness
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals.
Any child enrolled in a participating school or summer camp, or attending a SFSP meal service
site, who meets the applicable program's definition of "child," may receive meals under the applicable
program. In the case of the National School Lunch Program and School Breakfast Program, children
belonging to households meeting nationwide income eligibility requirements may receive meals at no
charge or at a reduced price. Children who have been determined ineligible for free or reduced price school
meals pay the full price, set by the School Food Authority, for their meals. Children attending SFSP meal
service sites receive their meals at no charge. As a general rule, a child's eligibility for free or reduced price
meals under a Child Nutrition Cluster program may be established by the submission of an annual
application or statement which furnishes such information as family income and family size. Local educational
agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the
child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For
a direct certification, annual eligibility determinations are based on the child's household receiving benefits
under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF
program (ALN 93.558). A household may furnish documentation of its participation in one of these programs;
or the school, institution, or sponsor may obtain the information directly from the state or local
agency that administers these programs. Certain foster, runaway, homeless, and migrant children are
categorically eligible for free school lunches and breakfasts. Direct certified households do not need to
complete an application.
The Food Service Director was responsible for reviewing the on-line and paper application eligibility
status and entering the information into the School Corporation's system (Skyward). There was no
evidence of an oversight, review, or approval process to ensure that the income verification, calculations,
and information entered into the Skyward system were accurate and the eligibility status was correct.
In addition, the Food Service Director was responsible for generating and reviewing the Direct
Certification Reports. There was no evidence of an oversight, review, or approval process to ensure that
the Direct Certification Reports were generated and reviewed.
The lack of internal controls was isolated to the fiscal year ended June 30, 2023.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management of what should be done to effect internal controls, and procedures
should consist of actions that would implement these policies.
Effect
Without the proper design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistant Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance. The School Corporation was required to submit annual data
reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted
included, but was not limited to, current period expenditures, prior period expenditures, and expenditures
per activity.
During the audit period the School Corporation submitted two ESSER I reports, two ESSER II
reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied,
prepared and submitted by one employee without an oversight or review process in place to prevent, or
detect and correct, errors.
In addition, three of the six reports submitted during the audit period contained errors. The errors
were as follows:
The ESSER II, Year 1 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate.
The ESSER II, Year 2 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate. Also, expenditures for
the key line item of "Supplies" as reported did not agree to the School Corporation's ledger.
The ESSER III, Year 2 key line of "Supplies" expenditures did not agree to the School
Corporation's ledger.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to the three reports noted above.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.302(b) states in part:
"The financial management system of each non-Federal entity must provide for the following
. . .
(2) Accurate, current, and complete disclosure of the financial results of each Federal
award or program in accordance with the reporting requirements set forth in §§ 200.328
and 200.329. . . ."
34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format
that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other
responsibilities under the program."
34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with
program requirements."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, ESSER reports were not supported by the School Corporation's records, were
not accurate and complete, and were not mathematically accurate. Additionally, key line items were not
supported by the records.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure supporting documentation is used and
retained for all required reports submitted on behalf of the Education Stabilization Fund program funds.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistant Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance. The School Corporation was required to submit annual data
reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted
included, but was not limited to, current period expenditures, prior period expenditures, and expenditures
per activity.
During the audit period the School Corporation submitted two ESSER I reports, two ESSER II
reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied,
prepared and submitted by one employee without an oversight or review process in place to prevent, or
detect and correct, errors.
In addition, three of the six reports submitted during the audit period contained errors. The errors
were as follows:
The ESSER II, Year 1 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate.
The ESSER II, Year 2 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate. Also, expenditures for
the key line item of "Supplies" as reported did not agree to the School Corporation's ledger.
The ESSER III, Year 2 key line of "Supplies" expenditures did not agree to the School
Corporation's ledger.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to the three reports noted above.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.302(b) states in part:
"The financial management system of each non-Federal entity must provide for the following
. . .
(2) Accurate, current, and complete disclosure of the financial results of each Federal
award or program in accordance with the reporting requirements set forth in §§ 200.328
and 200.329. . . ."
34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format
that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other
responsibilities under the program."
34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with
program requirements."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, ESSER reports were not supported by the School Corporation's records, were
not accurate and complete, and were not mathematically accurate. Additionally, key line items were not
supported by the records.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure supporting documentation is used and
retained for all required reports submitted on behalf of the Education Stabilization Fund program funds.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistant Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance. The School Corporation was required to submit annual data
reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted
included, but was not limited to, current period expenditures, prior period expenditures, and expenditures
per activity.
During the audit period the School Corporation submitted two ESSER I reports, two ESSER II
reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied,
prepared and submitted by one employee without an oversight or review process in place to prevent, or
detect and correct, errors.
In addition, three of the six reports submitted during the audit period contained errors. The errors
were as follows:
The ESSER II, Year 1 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate.
The ESSER II, Year 2 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate. Also, expenditures for
the key line item of "Supplies" as reported did not agree to the School Corporation's ledger.
The ESSER III, Year 2 key line of "Supplies" expenditures did not agree to the School
Corporation's ledger.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to the three reports noted above.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.302(b) states in part:
"The financial management system of each non-Federal entity must provide for the following
. . .
(2) Accurate, current, and complete disclosure of the financial results of each Federal
award or program in accordance with the reporting requirements set forth in §§ 200.328
and 200.329. . . ."
34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format
that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other
responsibilities under the program."
34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with
program requirements."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, ESSER reports were not supported by the School Corporation's records, were
not accurate and complete, and were not mathematically accurate. Additionally, key line items were not
supported by the records.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure supporting documentation is used and
retained for all required reports submitted on behalf of the Education Stabilization Fund program funds.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Number and Year (or Other Identifying Number): FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Finding: Material Weakness
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals.
Any child enrolled in a participating school or summer camp, or attending a SFSP meal service
site, who meets the applicable program's definition of "child," may receive meals under the applicable
program. In the case of the National School Lunch Program and School Breakfast Program, children
belonging to households meeting nationwide income eligibility requirements may receive meals at no
charge or at a reduced price. Children who have been determined ineligible for free or reduced price school
meals pay the full price, set by the School Food Authority, for their meals. Children attending SFSP meal
service sites receive their meals at no charge. As a general rule, a child's eligibility for free or reduced price
meals under a Child Nutrition Cluster program may be established by the submission of an annual
application or statement which furnishes such information as family income and family size. Local educational
agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the
child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For
a direct certification, annual eligibility determinations are based on the child's household receiving benefits
under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF
program (ALN 93.558). A household may furnish documentation of its participation in one of these programs;
or the school, institution, or sponsor may obtain the information directly from the state or local
agency that administers these programs. Certain foster, runaway, homeless, and migrant children are
categorically eligible for free school lunches and breakfasts. Direct certified households do not need to
complete an application.
The Food Service Director was responsible for reviewing the on-line and paper application eligibility
status and entering the information into the School Corporation's system (Skyward). There was no
evidence of an oversight, review, or approval process to ensure that the income verification, calculations,
and information entered into the Skyward system were accurate and the eligibility status was correct.
In addition, the Food Service Director was responsible for generating and reviewing the Direct
Certification Reports. There was no evidence of an oversight, review, or approval process to ensure that
the Direct Certification Reports were generated and reviewed.
The lack of internal controls was isolated to the fiscal year ended June 30, 2023.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management of what should be done to effect internal controls, and procedures
should consist of actions that would implement these policies.
Effect
Without the proper design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002
Subject: Child Nutrition Cluster - Verification of Free and Reduced Price Lunch Applications
Federal Agency: Department of Agriculture
Federal Program: National School Lunch Program
Assistance Listings Number: 10.555
Federal Award Number and Year (or Other Identifying Number): FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Verification of Free
and Reduced Price Lunch Applications (NSLP)
Audit Findings: Material Weakness, Other Matters
Condition and Context
By November 15 of each school year, the Local Educational Agencies (LEA) must verify the current
free and reduced price eligibility of households selected from a sample of applications that it has approved
for free and reduced price meals, unless the LEA is otherwise exempt from the verification requirement.
The verification sample size is based on the total number of approved applications on file on October 1.
If the LEA performs the verification function it must be in accordance with instructions provided by
the state agency. The LEA must follow up on children whose eligibility status has changed as the result of
verification activities to put them in the correct category.
As instructed, LEAs must select a sample of applications to be verified utilizing one of the following
methods:
a. Standard sample size - The lesser of 3 percent or 3,000 of the approved applications on
file as of October 1, selected from error-prone applications. For this purpose, error prone
applications are those showing household incomes within $100 monthly or $1,200 annually of
the income eligibility guidelines for free and reduced price meals.
b. Alternative sample sizes - 1) The lesser of 3 percent or 3,000 applications selected at
random from approved applications on file as of October 1 of the school year, or (2) The sum
of (a) the lesser of 1 percent of all applications identified as error-prone or 1,000 error-prone
applications, and (b) the lesser of 1/2 of 1 percent of, or 500, approved applications in which
the household provided, in lieu of income information, a case number showing participation in
the SNAP, TANF, or FDPIR.
In accordance with the above guidance, the School Corporation selected a sample of verifications
based on the alternative sample size. As such, the School Corporation was required to review the lesser
of three percent or 3,000 applications selected at random from approved applications on file as of October
1 of the 2022-2023 school year. On October 1, the School Corporation had 178 applications on file and
determined that 6 applications were required to be verified; however, the School Corporation chose to verify
14 applications.
The Food Service Director was responsible for reviewing the applications selected for verification
in fiscal year 2022-2023. A second review was performed by the Assistant Food Service Director as
indicated on the Verification Collection Report. Of the 14 applications verified by the School Corporation,
a sample of 6 applications were selected for testing. The following errors were noted:
(1) For two students, 1 application was to have the eligibility status changed from "Free" to
"Paid"; however, this change was not updated and made in the School Corporation's
system.
(2) For five students, 1 application had the eligibility status of "Reduced" in the School
Corporation's system as of July 18, 2022, which agreed to the income verification.
However, the eligibility status was changed in the School Corporation's system to "Free"
as of August 26, 2022.
The lack of internal controls and noncompliance was isolated to 2022-2023.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
7 CFR 245.6a states in part:
". . . (f) Verification procedures and assistance for households – . . .
(7) Eligibility changes. Based on the verification activities, the local educational agency
shall make appropriate modifications to the eligibility determinations made initially. The
local educational agency must notify the household of any change. Households must
be notified of any reduction in benefits in accordance with paragraph (j) of this section.
Households with reduced benefits or that are longer eligible for free or reduced price
meals must be notified of their right to reapply at any time with documentation of
income or participation in one of the eligible programs in paragraph (a)(1) of this
section. . . .
(j) Adverse action. If verification activities fail to confirm eligibility for free or reduced price
benefits or should the household fail to cooperate with verification efforts, the school or local
educational agency shall reduce or terminate benefits, as applicable, as follows: Ten days
advance notification shall be provided to households that are to receive a reduction or termination
of benefits, prior to the actual reduction or termination. The first day of the 10 day advance
notice period shall be the day the notice is sent. The notice shall advise the household of:
(1) The change;
(2) The reasons for the change;
(3) Notification of the right to appeal and when the appeal must be filed to ensure continued
benefits while awaiting a hearing and decision;
(4) Instructions on how to appeal; and
(5) The right to reapply at any time during the school year. The reasons for ineligibility
shall be properly documented and retained on file at the local educational agency."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, verifications for free and reduced price applications were not appropriately
changed.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure verifications for free and reduced price
applications are appropriately changed.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Number and Year (or Other Identifying Number): FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Finding: Material Weakness
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals.
Any child enrolled in a participating school or summer camp, or attending a SFSP meal service
site, who meets the applicable program's definition of "child," may receive meals under the applicable
program. In the case of the National School Lunch Program and School Breakfast Program, children
belonging to households meeting nationwide income eligibility requirements may receive meals at no
charge or at a reduced price. Children who have been determined ineligible for free or reduced price school
meals pay the full price, set by the School Food Authority, for their meals. Children attending SFSP meal
service sites receive their meals at no charge. As a general rule, a child's eligibility for free or reduced price
meals under a Child Nutrition Cluster program may be established by the submission of an annual
application or statement which furnishes such information as family income and family size. Local educational
agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the
child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For
a direct certification, annual eligibility determinations are based on the child's household receiving benefits
under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF
program (ALN 93.558). A household may furnish documentation of its participation in one of these programs;
or the school, institution, or sponsor may obtain the information directly from the state or local
agency that administers these programs. Certain foster, runaway, homeless, and migrant children are
categorically eligible for free school lunches and breakfasts. Direct certified households do not need to
complete an application.
The Food Service Director was responsible for reviewing the on-line and paper application eligibility
status and entering the information into the School Corporation's system (Skyward). There was no
evidence of an oversight, review, or approval process to ensure that the income verification, calculations,
and information entered into the Skyward system were accurate and the eligibility status was correct.
In addition, the Food Service Director was responsible for generating and reviewing the Direct
Certification Reports. There was no evidence of an oversight, review, or approval process to ensure that
the Direct Certification Reports were generated and reviewed.
The lack of internal controls was isolated to the fiscal year ended June 30, 2023.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management of what should be done to effect internal controls, and procedures
should consist of actions that would implement these policies.
Effect
Without the proper design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Number and Year (or Other Identifying Number): FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Finding: Material Weakness
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals.
Any child enrolled in a participating school or summer camp, or attending a SFSP meal service
site, who meets the applicable program's definition of "child," may receive meals under the applicable
program. In the case of the National School Lunch Program and School Breakfast Program, children
belonging to households meeting nationwide income eligibility requirements may receive meals at no
charge or at a reduced price. Children who have been determined ineligible for free or reduced price school
meals pay the full price, set by the School Food Authority, for their meals. Children attending SFSP meal
service sites receive their meals at no charge. As a general rule, a child's eligibility for free or reduced price
meals under a Child Nutrition Cluster program may be established by the submission of an annual
application or statement which furnishes such information as family income and family size. Local educational
agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the
child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For
a direct certification, annual eligibility determinations are based on the child's household receiving benefits
under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF
program (ALN 93.558). A household may furnish documentation of its participation in one of these programs;
or the school, institution, or sponsor may obtain the information directly from the state or local
agency that administers these programs. Certain foster, runaway, homeless, and migrant children are
categorically eligible for free school lunches and breakfasts. Direct certified households do not need to
complete an application.
The Food Service Director was responsible for reviewing the on-line and paper application eligibility
status and entering the information into the School Corporation's system (Skyward). There was no
evidence of an oversight, review, or approval process to ensure that the income verification, calculations,
and information entered into the Skyward system were accurate and the eligibility status was correct.
In addition, the Food Service Director was responsible for generating and reviewing the Direct
Certification Reports. There was no evidence of an oversight, review, or approval process to ensure that
the Direct Certification Reports were generated and reviewed.
The lack of internal controls was isolated to the fiscal year ended June 30, 2023.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management of what should be done to effect internal controls, and procedures
should consist of actions that would implement these policies.
Effect
Without the proper design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance
with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal
awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies
and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as
a cost or used to meet cost-sharing or matching requirements of another federal program, and be
adequately documented.
A sample of 40 food service program claims were selected for testing to verify the expenditures
were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors.
For these 10 claims, the invoice section in which the purchase price did not match the bid price was
abstracted for further review. Upon further review, it was determined that 59 individual items were not
charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, cost must meet the following general criteria in
order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally
financed and other activities of the non-Federal entity. . . .
(g) Be adequately documented. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the School Corporation was overcharged for multiple items.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are adequately documented and
charged and the approved or agreed upon rates.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases. There was no documented
oversight, review, or approval process in place at the School Corporation to ensure proper
procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
The School Corporation did not obtain price or rate quotes for the three vendors tested that
were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000
micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number
of quotes were not obtained from qualified sources nor was there any documentation detailing
the history of procurement, which must include the reason for the procurement method
used.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a non-procurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. The verification is to be done by checking the SAMs
exclusions, collecting a certification from that vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions,
totaling $320,121, were selected for testing. For the four vendors, the School Corporation
had not performed procedures to ensure the vendors were not suspended or debarred, or
otherwise excluded or disqualified from participating in federal assistance programs or activities
for suspension or debarment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases -
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold
but does not exceed the simplified acquisition threshold. If small purchase
procedures are used, price or rate quotations must be obtained from an
adequate number of qualified sources as determined appropriate by the non-
Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed or implemented, which includes segregation
of key functions, by management of the School Corporation to ensure that policies and procedures were in
place related to procurement and suspension and debarment. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of
quotes were not obtained.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
or the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure proper procurement procedures are
followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any
covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistant Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance. The School Corporation was required to submit annual data
reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted
included, but was not limited to, current period expenditures, prior period expenditures, and expenditures
per activity.
During the audit period the School Corporation submitted two ESSER I reports, two ESSER II
reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied,
prepared and submitted by one employee without an oversight or review process in place to prevent, or
detect and correct, errors.
In addition, three of the six reports submitted during the audit period contained errors. The errors
were as follows:
The ESSER II, Year 1 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate.
The ESSER II, Year 2 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate. Also, expenditures for
the key line item of "Supplies" as reported did not agree to the School Corporation's ledger.
The ESSER III, Year 2 key line of "Supplies" expenditures did not agree to the School
Corporation's ledger.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to the three reports noted above.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.302(b) states in part:
"The financial management system of each non-Federal entity must provide for the following
. . .
(2) Accurate, current, and complete disclosure of the financial results of each Federal
award or program in accordance with the reporting requirements set forth in §§ 200.328
and 200.329. . . ."
34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format
that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other
responsibilities under the program."
34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with
program requirements."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, ESSER reports were not supported by the School Corporation's records, were
not accurate and complete, and were not mathematically accurate. Additionally, key line items were not
supported by the records.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure supporting documentation is used and
retained for all required reports submitted on behalf of the Education Stabilization Fund program funds.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistant Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance. The School Corporation was required to submit annual data
reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted
included, but was not limited to, current period expenditures, prior period expenditures, and expenditures
per activity.
During the audit period the School Corporation submitted two ESSER I reports, two ESSER II
reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied,
prepared and submitted by one employee without an oversight or review process in place to prevent, or
detect and correct, errors.
In addition, three of the six reports submitted during the audit period contained errors. The errors
were as follows:
The ESSER II, Year 1 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate.
The ESSER II, Year 2 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate. Also, expenditures for
the key line item of "Supplies" as reported did not agree to the School Corporation's ledger.
The ESSER III, Year 2 key line of "Supplies" expenditures did not agree to the School
Corporation's ledger.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to the three reports noted above.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.302(b) states in part:
"The financial management system of each non-Federal entity must provide for the following
. . .
(2) Accurate, current, and complete disclosure of the financial results of each Federal
award or program in accordance with the reporting requirements set forth in §§ 200.328
and 200.329. . . ."
34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format
that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other
responsibilities under the program."
34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with
program requirements."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, ESSER reports were not supported by the School Corporation's records, were
not accurate and complete, and were not mathematically accurate. Additionally, key line items were not
supported by the records.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure supporting documentation is used and
retained for all required reports submitted on behalf of the Education Stabilization Fund program funds.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistant Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance. The School Corporation was required to submit annual data
reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted
included, but was not limited to, current period expenditures, prior period expenditures, and expenditures
per activity.
During the audit period the School Corporation submitted two ESSER I reports, two ESSER II
reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied,
prepared and submitted by one employee without an oversight or review process in place to prevent, or
detect and correct, errors.
In addition, three of the six reports submitted during the audit period contained errors. The errors
were as follows:
The ESSER II, Year 1 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate.
The ESSER II, Year 2 report was not supported by the School Corporation's records, was
not accurate and complete, and was not mathematically accurate. Also, expenditures for
the key line item of "Supplies" as reported did not agree to the School Corporation's ledger.
The ESSER III, Year 2 key line of "Supplies" expenditures did not agree to the School
Corporation's ledger.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to the three reports noted above.
Criteria
2 CFR 200.303 states in part:
"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). . . ."
2 CFR 200.302(b) states in part:
"The financial management system of each non-Federal entity must provide for the following
. . .
(2) Accurate, current, and complete disclosure of the financial results of each Federal
award or program in accordance with the reporting requirements set forth in §§ 200.328
and 200.329. . . ."
34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format
that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other
responsibilities under the program."
34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with
program requirements."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, ESSER reports were not supported by the School Corporation's records, were
not accurate and complete, and were not mathematically accurate. Additionally, key line items were not
supported by the records.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure supporting documentation is used and
retained for all required reports submitted on behalf of the Education Stabilization Fund program funds.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.