2022-003 Department of Education Federal Financial Assistance Listing 84.425E, 84.425F, 84.425K Federal Award Numbers P425E201501, P425E201757, P425E200021, award year 2021 COVID-19 Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Period of Performance Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: The College is required to have procedures in place to ensure that federal awards are expended only for allowable costs in accordance with Subpart E ? Cost Principles of the Uniform Guidance. Allowable costs are supported by appropriate documentation and correctly charged as to account, amount, and period. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. 2 CFR 200.430(i) establishes the standards for documentation of personnel expenses including charges to Federal awards for salaries and wages. 2 CFR 200.403(h) establishes that costs must be incurred during the approved budget period. Condition: In our sample of expenditures selected for testing, we noted the following items; a) Through testing of operational expenditures of the College, it was determined; a. Payroll expenditures charged to the award were not for costs newly associated with the coronavirus, a requirement communicated within the supplemental guidance in the Higher Education Emergency Relief Fund III Frequently Asked Questions published May 11, 2021 and updated May 24, 2021. b) Through testing of disbursements to students, it was determined; a. No support could not be provided to substantiate a secondary level of review was completed prior to disbursement of funds. b. 26 instances identified in which the College directly controlled how student?s use their emergency financial aid grant. c. 8 instances identified in which college discharged outstanding balance on student account for costs incurred prior to March 13, 2020. d. 2 instances identified in which the College charged coronavirus vaccine incentive payments under the student portion of HEERF award. Cause: The College did not have a full understanding of the federal program requirements between HEERF I, II and III as it relates to Activities Allowed, Allowable Costs, and Period of Performance. Effect: The College?s controls did not detect or correct the errors identified, which resulted in disallowed costs charged to the federal awards. Questioned Costs: Total questioned costs of $2,219,674Context/Sampling: a) For operational expenditures of the College a nonstatistical sample of 60 expenditures was selected for testing, including 7 non-payroll expenditures out of approximately 50 non-payroll transactions, accounting for approximately $143,000 of $245,000 total non-payroll costs charged to the federal program, and 53 payroll expenditures out of approximately 6,700 payroll transactions, accounting for approximately $74,000 of $1,920,000 total payroll costs charged to the federal program. b) For disbursements to students of the College a nonstatistical sample of 60 expenditures was selected for testing, including 43 disbursements funded from institutional portion out of approximately 600, accounting for approximately $53,000 of $711,000 total disbursements to students funded through institutional portion charged to the federal program, and 17 disbursements funded from student portion out of approximately 400, accounting for approximately $74,000 of $246,000 total disbursements to students funded through student portion charged to the federal program. Repeat Finding from Prior Year: No Recommendation: We recommend management review procedures and control processes to comply with federal requirements noted above. Views of Responsible Officials: Management is in agreement with the finding.
2022-004 Department of Education Federal Financial Assistance Listing 84.425E, 84.425F, 84.425K Federal Award Numbers P425E201501, P425E201757, P425E200021, award year 2021 COVID-19 Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Reporting Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. 2 CFR 200.327 and 2 CFR 200.328 require the auditee to collect financial information and monitor its activities under federal awards to assure compliance with applicable federal requirements and performance expectations are being achieved and report these items in accordance with the program requirements. Condition: In our sample of reports selected for testing, we noted the following items; a) No support could be provided to substantiate a secondary level of review was completed for student and institutional portion quarterly reports for the quarters ended 12/31/2021 and 3/31/2022 and the year two annual report. b) Student portion quarterly reports ending 12/31/2021 and 3/31/2022 reported cumulative expenditures incurred from the inception of the federal program rather than expenditures incurred within the quarter, resulting in an error of $105,202 in the first report and $165,154 in the second report. Cause: There was a lapse in oversight of the internal control process ensuring expenditures reported were accurate and reconciled to supporting documentation. The College failed to identify the change in reporting requirements between HEERF awards. Effect: The College?s controls did not detect or correct the errors identified, which resulted in inaccurate expenditures reported within HEERF quarterly reports. Additionally, not having a formal oversight process over reporting results in a reasonable possibility that reports that are inaccurate or incomplete could be submitted. Questioned Costs: None reported. Context/Sampling: Four out of eight quarterly reports were reviewed along with one annual report. Repeat Finding from Prior Year: Yes, prior year finding 2021-003. Recommendation: We recommend that management implement procedures and control processes to comply with the federal requirements noted above and ensure documentation is retained supporting a secondary level of review is completed prior to submission of required reports. Views of Responsible Officials: Management is in agreement with the finding.
2022-005 Department of Education Federal Financial Assistance Listing 84.425E, 84.425F, 84.425K Federal Award Numbers P425E201501, P425E201757, P425E200021, award year 2021 COVID-19 Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Procurement, Suspension and Debarment Material Weakness in Internal Control over Compliance Criteria: 2 CFR 200.303(a) of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The nonfederal entity?s documented procurement procedures must conform to the procurement standards identified in 2 CFR 200.317 through 200.327. 2 CFR 200 Appendix II requires certain provisions be included in contracts if criteria are met. As outlined in 2 CFR 180, recipients must not utilize any vendor who is suspended or debarred or is otherwise excluded from the central contractor registry. Condition: The College?s procurement policy did not include all the required elements as outlined in the Uniform Guidance. Additionally, two vendors were not verified against the central contractor registry prior to expenses incurred to ensure that the vendor was not suspended or debarred. Cause: The College?s procurement policy does not include all the required elements as outlined in the Uniform Guidance. There was a lapse in oversight of the internal control process ensuring vendors are verified against the central contractor registry. Effect: Without a written procurement policy in accordance with the Uniform Guidance, demonstrating that the program complies with laws, regulations, and other compliance requirements is difficult. Failing to verify vendors against the central contractor registry may result in the College contracting for services with ineligible parties Questioned Costs: None reported. Context/Sampling: The College had two transactions totaling $120,822 equaling or exceeding $25,000 that were selected for suspension and debarment testing. Those two contracts selected for testing totaled $120,822. Repeat Finding from Prior Year: No Recommendation: We recommend that management implement procedures and control processes to comply with the federal requirements noted above. Views of Responsible Officials: Management is in agreement with the finding.
2022-003 Department of Education Federal Financial Assistance Listing 84.425E, 84.425F, 84.425K Federal Award Numbers P425E201501, P425E201757, P425E200021, award year 2021 COVID-19 Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Period of Performance Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: The College is required to have procedures in place to ensure that federal awards are expended only for allowable costs in accordance with Subpart E ? Cost Principles of the Uniform Guidance. Allowable costs are supported by appropriate documentation and correctly charged as to account, amount, and period. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. 2 CFR 200.430(i) establishes the standards for documentation of personnel expenses including charges to Federal awards for salaries and wages. 2 CFR 200.403(h) establishes that costs must be incurred during the approved budget period. Condition: In our sample of expenditures selected for testing, we noted the following items; a) Through testing of operational expenditures of the College, it was determined; a. Payroll expenditures charged to the award were not for costs newly associated with the coronavirus, a requirement communicated within the supplemental guidance in the Higher Education Emergency Relief Fund III Frequently Asked Questions published May 11, 2021 and updated May 24, 2021. b) Through testing of disbursements to students, it was determined; a. No support could not be provided to substantiate a secondary level of review was completed prior to disbursement of funds. b. 26 instances identified in which the College directly controlled how student?s use their emergency financial aid grant. c. 8 instances identified in which college discharged outstanding balance on student account for costs incurred prior to March 13, 2020. d. 2 instances identified in which the College charged coronavirus vaccine incentive payments under the student portion of HEERF award. Cause: The College did not have a full understanding of the federal program requirements between HEERF I, II and III as it relates to Activities Allowed, Allowable Costs, and Period of Performance. Effect: The College?s controls did not detect or correct the errors identified, which resulted in disallowed costs charged to the federal awards. Questioned Costs: Total questioned costs of $2,219,674Context/Sampling: a) For operational expenditures of the College a nonstatistical sample of 60 expenditures was selected for testing, including 7 non-payroll expenditures out of approximately 50 non-payroll transactions, accounting for approximately $143,000 of $245,000 total non-payroll costs charged to the federal program, and 53 payroll expenditures out of approximately 6,700 payroll transactions, accounting for approximately $74,000 of $1,920,000 total payroll costs charged to the federal program. b) For disbursements to students of the College a nonstatistical sample of 60 expenditures was selected for testing, including 43 disbursements funded from institutional portion out of approximately 600, accounting for approximately $53,000 of $711,000 total disbursements to students funded through institutional portion charged to the federal program, and 17 disbursements funded from student portion out of approximately 400, accounting for approximately $74,000 of $246,000 total disbursements to students funded through student portion charged to the federal program. Repeat Finding from Prior Year: No Recommendation: We recommend management review procedures and control processes to comply with federal requirements noted above. Views of Responsible Officials: Management is in agreement with the finding.
2022-004 Department of Education Federal Financial Assistance Listing 84.425E, 84.425F, 84.425K Federal Award Numbers P425E201501, P425E201757, P425E200021, award year 2021 COVID-19 Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Reporting Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. 2 CFR 200.327 and 2 CFR 200.328 require the auditee to collect financial information and monitor its activities under federal awards to assure compliance with applicable federal requirements and performance expectations are being achieved and report these items in accordance with the program requirements. Condition: In our sample of reports selected for testing, we noted the following items; a) No support could be provided to substantiate a secondary level of review was completed for student and institutional portion quarterly reports for the quarters ended 12/31/2021 and 3/31/2022 and the year two annual report. b) Student portion quarterly reports ending 12/31/2021 and 3/31/2022 reported cumulative expenditures incurred from the inception of the federal program rather than expenditures incurred within the quarter, resulting in an error of $105,202 in the first report and $165,154 in the second report. Cause: There was a lapse in oversight of the internal control process ensuring expenditures reported were accurate and reconciled to supporting documentation. The College failed to identify the change in reporting requirements between HEERF awards. Effect: The College?s controls did not detect or correct the errors identified, which resulted in inaccurate expenditures reported within HEERF quarterly reports. Additionally, not having a formal oversight process over reporting results in a reasonable possibility that reports that are inaccurate or incomplete could be submitted. Questioned Costs: None reported. Context/Sampling: Four out of eight quarterly reports were reviewed along with one annual report. Repeat Finding from Prior Year: Yes, prior year finding 2021-003. Recommendation: We recommend that management implement procedures and control processes to comply with the federal requirements noted above and ensure documentation is retained supporting a secondary level of review is completed prior to submission of required reports. Views of Responsible Officials: Management is in agreement with the finding.
2022-005 Department of Education Federal Financial Assistance Listing 84.425E, 84.425F, 84.425K Federal Award Numbers P425E201501, P425E201757, P425E200021, award year 2021 COVID-19 Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Procurement, Suspension and Debarment Material Weakness in Internal Control over Compliance Criteria: 2 CFR 200.303(a) of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The nonfederal entity?s documented procurement procedures must conform to the procurement standards identified in 2 CFR 200.317 through 200.327. 2 CFR 200 Appendix II requires certain provisions be included in contracts if criteria are met. As outlined in 2 CFR 180, recipients must not utilize any vendor who is suspended or debarred or is otherwise excluded from the central contractor registry. Condition: The College?s procurement policy did not include all the required elements as outlined in the Uniform Guidance. Additionally, two vendors were not verified against the central contractor registry prior to expenses incurred to ensure that the vendor was not suspended or debarred. Cause: The College?s procurement policy does not include all the required elements as outlined in the Uniform Guidance. There was a lapse in oversight of the internal control process ensuring vendors are verified against the central contractor registry. Effect: Without a written procurement policy in accordance with the Uniform Guidance, demonstrating that the program complies with laws, regulations, and other compliance requirements is difficult. Failing to verify vendors against the central contractor registry may result in the College contracting for services with ineligible parties Questioned Costs: None reported. Context/Sampling: The College had two transactions totaling $120,822 equaling or exceeding $25,000 that were selected for suspension and debarment testing. Those two contracts selected for testing totaled $120,822. Repeat Finding from Prior Year: No Recommendation: We recommend that management implement procedures and control processes to comply with the federal requirements noted above. Views of Responsible Officials: Management is in agreement with the finding.
FINDING 2022-001 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number (or Other Identifying Number): 84.425 Federal Award Number: S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Significant Deficiency, Other Matters INDIANA STATE BOARD OF ACCOUNTS 15 NORTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Equipment and Real Property Management compliance requirement. A property record or capital asset listing which would include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. Three of the fourteen assets purchased during the audit period from the ESSER II award were not included in the School Corporation's capital asset listing. In addition, the acquisition date and cost of the property for the eleven assets included in the capital asset listing did not agree to the supporting documentation for the purchases. For all assets, the capital asset listing did not identify which assets were purchased with federal dollars. 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 200.313(d)(1) states: "Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property." Cause Management had not developed a system of internal control that would have ensured compliance with the Equipment and Real Property Management compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Equipment and Real Property Management compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish internal controls to ensure compliance and comply with the grant agreement and the Equipment and Real Property Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
2022 ? 005 Allowable Activities and Costs/Cost Principals (Significant Deficiency and Noncompliance) Federal Agency: U.S. Department of Treasury U.S. Department of Housing U.S. Department of Transportation Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds HOME Investment Partnerships Program Federal Transit Cluster Assistance Listing Number: 21.027, 14.239, Multiple Federal Award Identification Number and Year: ALN 21.027: Pub. L. No. 117-2-2021 ALN 14.239 M-19-MC-35-0209 2019 & M-16-MC-35-0209 2016; ALN Multiple: NM-2020-010 Award Period: ALN 21.027 ? 5/10/2021 - 12/31/2026 ALN 14.239 ? 7/22/2016-9/1/2027 ALN Multiple ? 1/20/2020-12/31/2022 Type of Finding: ? Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: According to ? 200.303 Internal controls of 2 CFR Part 200, the non-Federal entity must 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. Further, the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements. According to the City's ARPA Program Plan Memorandum, all applicants must have 50 or fewer full-time equivalent (FTE) employees. Once the application is complete, it will enter a secondary review for final decision. Once a business receives a grant they must submit a report six months after as detailed in the grant agreement. Condition: During single audit testwork over reporting, the following issues were noted which are detailed by ALN Number. ALN 21.027 ? The City did not obtain employment verification for one applicant, perform a secondary review for two applications, nor obtain the six-month report for six applications. ALN 14.239/Multiple ? The City did not have effective internal controls in place to ensure timesheets are prepared timely as well as payroll grant hours accurately recorded in the accounting system. 2022 ? 005 Allowable Activities and Costs/Cost Principals (Significant Deficiency and Noncompliance) (Continued) Questioned costs: ALN 21.027: $30,000 ALN 14.239: $69.63 ALN Multiple: None Context: During our testing, we noted the following exceptions, which are detailed by ALN Number. ALN 21.027 ? 1 of the 60 small business applications did not have the number of employees. ? 2 of the 60 small business grant applications did not have a secondary review for final decision. ? 6 of the 60 small businesses did not submit a report six months after receiving the grant. ALN 14.239 ? During our testing, we noted three instances in which an employee's timesheet was not signed by the employee and their supervisor until between 8-12 months after the pay period ended. Also, we noted three instances in which grant hours listed on timesheets did not agree to the hours recorded in the accounting system and charged to the grant. ALN Multiple ? During our testing, we noted two instances in which an employee's time was not approved by their supervisor. Cause: The City did not follow its ARPA Program Plan Memorandum. Additionally, the City lacks a policy and internal control related to the required timing of timesheet preparation, review and approval. Effect: The auditor noted instances of noncompliance and lack of effective internal controls. Noncompliance results in ineligible small businesses receiving grant funding and the City not receiving the required reporting by the small businesses. Recommendation: We recommend the City design controls to ensure an adequate review process is in place to review applications to determine the eligibility of small business for grant funding. Also, we recommend the City design controls to ensure any required reports are submitted by grantees. Additionally, we recommend the City create a policy related to timesheet preparation, review and approval as well as develop a procedure to ensure all grant hours listed on timesheets are reconciled to the accounting system. Management Response: Management agrees with the finding. The grants distributed by the Economic Development Department were a lifeline to small businesses that were just holding on. While a strong program was set up in a very short timeframe some reviews and follow-up were not completed. Additionally, the Family & Community Services Department will ensure timesheets are signed timely. Additionally, the department will work with the Grants Section to ensure timesheets, Kronos and Peoplesoft agree. Timeline and Responsible Position: June 2023 ? Department Directors, Economic Development, Family & Community Services and Transit
2022 ? 005 Allowable Activities and Costs/Cost Principals (Significant Deficiency and Noncompliance) Federal Agency: U.S. Department of Treasury U.S. Department of Housing U.S. Department of Transportation Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds HOME Investment Partnerships Program Federal Transit Cluster Assistance Listing Number: 21.027, 14.239, Multiple Federal Award Identification Number and Year: ALN 21.027: Pub. L. No. 117-2-2021 ALN 14.239 M-19-MC-35-0209 2019 & M-16-MC-35-0209 2016; ALN Multiple: NM-2020-010 Award Period: ALN 21.027 ? 5/10/2021 - 12/31/2026 ALN 14.239 ? 7/22/2016-9/1/2027 ALN Multiple ? 1/20/2020-12/31/2022 Type of Finding: ? Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: According to ? 200.303 Internal controls of 2 CFR Part 200, the non-Federal entity must 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. Further, the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements. According to the City's ARPA Program Plan Memorandum, all applicants must have 50 or fewer full-time equivalent (FTE) employees. Once the application is complete, it will enter a secondary review for final decision. Once a business receives a grant they must submit a report six months after as detailed in the grant agreement. Condition: During single audit testwork over reporting, the following issues were noted which are detailed by ALN Number. ALN 21.027 ? The City did not obtain employment verification for one applicant, perform a secondary review for two applications, nor obtain the six-month report for six applications. ALN 14.239/Multiple ? The City did not have effective internal controls in place to ensure timesheets are prepared timely as well as payroll grant hours accurately recorded in the accounting system. 2022 ? 005 Allowable Activities and Costs/Cost Principals (Significant Deficiency and Noncompliance) (Continued) Questioned costs: ALN 21.027: $30,000 ALN 14.239: $69.63 ALN Multiple: None Context: During our testing, we noted the following exceptions, which are detailed by ALN Number. ALN 21.027 ? 1 of the 60 small business applications did not have the number of employees. ? 2 of the 60 small business grant applications did not have a secondary review for final decision. ? 6 of the 60 small businesses did not submit a report six months after receiving the grant. ALN 14.239 ? During our testing, we noted three instances in which an employee's timesheet was not signed by the employee and their supervisor until between 8-12 months after the pay period ended. Also, we noted three instances in which grant hours listed on timesheets did not agree to the hours recorded in the accounting system and charged to the grant. ALN Multiple ? During our testing, we noted two instances in which an employee's time was not approved by their supervisor. Cause: The City did not follow its ARPA Program Plan Memorandum. Additionally, the City lacks a policy and internal control related to the required timing of timesheet preparation, review and approval. Effect: The auditor noted instances of noncompliance and lack of effective internal controls. Noncompliance results in ineligible small businesses receiving grant funding and the City not receiving the required reporting by the small businesses. Recommendation: We recommend the City design controls to ensure an adequate review process is in place to review applications to determine the eligibility of small business for grant funding. Also, we recommend the City design controls to ensure any required reports are submitted by grantees. Additionally, we recommend the City create a policy related to timesheet preparation, review and approval as well as develop a procedure to ensure all grant hours listed on timesheets are reconciled to the accounting system. Management Response: Management agrees with the finding. The grants distributed by the Economic Development Department were a lifeline to small businesses that were just holding on. While a strong program was set up in a very short timeframe some reviews and follow-up were not completed. Additionally, the Family & Community Services Department will ensure timesheets are signed timely. Additionally, the department will work with the Grants Section to ensure timesheets, Kronos and Peoplesoft agree. Timeline and Responsible Position: June 2023 ? Department Directors, Economic Development, Family & Community Services and Transit
2022 ? 005 Allowable Activities and Costs/Cost Principals (Significant Deficiency and Noncompliance) Federal Agency: U.S. Department of Treasury U.S. Department of Housing U.S. Department of Transportation Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds HOME Investment Partnerships Program Federal Transit Cluster Assistance Listing Number: 21.027, 14.239, Multiple Federal Award Identification Number and Year: ALN 21.027: Pub. L. No. 117-2-2021 ALN 14.239 M-19-MC-35-0209 2019 & M-16-MC-35-0209 2016; ALN Multiple: NM-2020-010 Award Period: ALN 21.027 ? 5/10/2021 - 12/31/2026 ALN 14.239 ? 7/22/2016-9/1/2027 ALN Multiple ? 1/20/2020-12/31/2022 Type of Finding: ? Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: According to ? 200.303 Internal controls of 2 CFR Part 200, the non-Federal entity must 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. Further, the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements. According to the City's ARPA Program Plan Memorandum, all applicants must have 50 or fewer full-time equivalent (FTE) employees. Once the application is complete, it will enter a secondary review for final decision. Once a business receives a grant they must submit a report six months after as detailed in the grant agreement. Condition: During single audit testwork over reporting, the following issues were noted which are detailed by ALN Number. ALN 21.027 ? The City did not obtain employment verification for one applicant, perform a secondary review for two applications, nor obtain the six-month report for six applications. ALN 14.239/Multiple ? The City did not have effective internal controls in place to ensure timesheets are prepared timely as well as payroll grant hours accurately recorded in the accounting system. 2022 ? 005 Allowable Activities and Costs/Cost Principals (Significant Deficiency and Noncompliance) (Continued) Questioned costs: ALN 21.027: $30,000 ALN 14.239: $69.63 ALN Multiple: None Context: During our testing, we noted the following exceptions, which are detailed by ALN Number. ALN 21.027 ? 1 of the 60 small business applications did not have the number of employees. ? 2 of the 60 small business grant applications did not have a secondary review for final decision. ? 6 of the 60 small businesses did not submit a report six months after receiving the grant. ALN 14.239 ? During our testing, we noted three instances in which an employee's timesheet was not signed by the employee and their supervisor until between 8-12 months after the pay period ended. Also, we noted three instances in which grant hours listed on timesheets did not agree to the hours recorded in the accounting system and charged to the grant. ALN Multiple ? During our testing, we noted two instances in which an employee's time was not approved by their supervisor. Cause: The City did not follow its ARPA Program Plan Memorandum. Additionally, the City lacks a policy and internal control related to the required timing of timesheet preparation, review and approval. Effect: The auditor noted instances of noncompliance and lack of effective internal controls. Noncompliance results in ineligible small businesses receiving grant funding and the City not receiving the required reporting by the small businesses. Recommendation: We recommend the City design controls to ensure an adequate review process is in place to review applications to determine the eligibility of small business for grant funding. Also, we recommend the City design controls to ensure any required reports are submitted by grantees. Additionally, we recommend the City create a policy related to timesheet preparation, review and approval as well as develop a procedure to ensure all grant hours listed on timesheets are reconciled to the accounting system. Management Response: Management agrees with the finding. The grants distributed by the Economic Development Department were a lifeline to small businesses that were just holding on. While a strong program was set up in a very short timeframe some reviews and follow-up were not completed. Additionally, the Family & Community Services Department will ensure timesheets are signed timely. Additionally, the department will work with the Grants Section to ensure timesheets, Kronos and Peoplesoft agree. Timeline and Responsible Position: June 2023 ? Department Directors, Economic Development, Family & Community Services and Transit
2022-013: U.S. Department of Education Passed through State of Nevada Public Charter School Authority and the State of Nevada Department of Education COVID-19 Education Stabilization Fund, 84.425 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance Grant Award Number: Affects all grant awards included under assistance listing 84.425 on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance federal statutes, regulations, and the terms and conditions of the Federal award. A key component of effective internal control is the segregation of duties through a review and approval process. Condition: Costs charged to the program did not have evidence of review by an individual independent of the preparation of the allocation to the program. Cause: The School did not have adequate internal controls to ensure review of costs charged to the program occurred and was documented. Effect: Unallowable costs may be charged to the program and not detected by the School. Questioned Costs: None noted Context/Sampling: A non-statistical sample of four reimbursement requests out of a population of 12 was selected for testing. There were a total of 38 transactions included on the four reimbursement requests and there was no evidence of review on 37 of the 38 transactions tested. Repeat Finding from Prior Year: No Recommendation: We recommend the School enhance internal controls to ensure review of costs charged to the program occurs and is documented. Views of Responsible Officials: Management agrees with this finding.
2022-013: U.S. Department of Education Passed through State of Nevada Public Charter School Authority and the State of Nevada Department of Education COVID-19 Education Stabilization Fund, 84.425 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance Grant Award Number: Affects all grant awards included under assistance listing 84.425 on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance federal statutes, regulations, and the terms and conditions of the Federal award. A key component of effective internal control is the segregation of duties through a review and approval process. Condition: Costs charged to the program did not have evidence of review by an individual independent of the preparation of the allocation to the program. Cause: The School did not have adequate internal controls to ensure review of costs charged to the program occurred and was documented. Effect: Unallowable costs may be charged to the program and not detected by the School. Questioned Costs: None noted Context/Sampling: A non-statistical sample of four reimbursement requests out of a population of 12 was selected for testing. There were a total of 38 transactions included on the four reimbursement requests and there was no evidence of review on 37 of the 38 transactions tested. Repeat Finding from Prior Year: No Recommendation: We recommend the School enhance internal controls to ensure review of costs charged to the program occurs and is documented. Views of Responsible Officials: Management agrees with this finding.
2022-013: U.S. Department of Education Passed through State of Nevada Public Charter School Authority and the State of Nevada Department of Education COVID-19 Education Stabilization Fund, 84.425 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance Grant Award Number: Affects all grant awards included under assistance listing 84.425 on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance federal statutes, regulations, and the terms and conditions of the Federal award. A key component of effective internal control is the segregation of duties through a review and approval process. Condition: Costs charged to the program did not have evidence of review by an individual independent of the preparation of the allocation to the program. Cause: The School did not have adequate internal controls to ensure review of costs charged to the program occurred and was documented. Effect: Unallowable costs may be charged to the program and not detected by the School. Questioned Costs: None noted Context/Sampling: A non-statistical sample of four reimbursement requests out of a population of 12 was selected for testing. There were a total of 38 transactions included on the four reimbursement requests and there was no evidence of review on 37 of the 38 transactions tested. Repeat Finding from Prior Year: No Recommendation: We recommend the School enhance internal controls to ensure review of costs charged to the program occurs and is documented. Views of Responsible Officials: Management agrees with this finding.
2022-013: U.S. Department of Education Passed through State of Nevada Public Charter School Authority and the State of Nevada Department of Education COVID-19 Education Stabilization Fund, 84.425 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance Grant Award Number: Affects all grant awards included under assistance listing 84.425 on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance federal statutes, regulations, and the terms and conditions of the Federal award. A key component of effective internal control is the segregation of duties through a review and approval process. Condition: Costs charged to the program did not have evidence of review by an individual independent of the preparation of the allocation to the program. Cause: The School did not have adequate internal controls to ensure review of costs charged to the program occurred and was documented. Effect: Unallowable costs may be charged to the program and not detected by the School. Questioned Costs: None noted Context/Sampling: A non-statistical sample of four reimbursement requests out of a population of 12 was selected for testing. There were a total of 38 transactions included on the four reimbursement requests and there was no evidence of review on 37 of the 38 transactions tested. Repeat Finding from Prior Year: No Recommendation: We recommend the School enhance internal controls to ensure review of costs charged to the program occurs and is documented. Views of Responsible Officials: Management agrees with this finding.
2022-013: U.S. Department of Education Passed through State of Nevada Public Charter School Authority and the State of Nevada Department of Education COVID-19 Education Stabilization Fund, 84.425 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance Grant Award Number: Affects all grant awards included under assistance listing 84.425 on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance federal statutes, regulations, and the terms and conditions of the Federal award. A key component of effective internal control is the segregation of duties through a review and approval process. Condition: Costs charged to the program did not have evidence of review by an individual independent of the preparation of the allocation to the program. Cause: The School did not have adequate internal controls to ensure review of costs charged to the program occurred and was documented. Effect: Unallowable costs may be charged to the program and not detected by the School. Questioned Costs: None noted Context/Sampling: A non-statistical sample of four reimbursement requests out of a population of 12 was selected for testing. There were a total of 38 transactions included on the four reimbursement requests and there was no evidence of review on 37 of the 38 transactions tested. Repeat Finding from Prior Year: No Recommendation: We recommend the School enhance internal controls to ensure review of costs charged to the program occurs and is documented. Views of Responsible Officials: Management agrees with this finding.
Federal Agency: U.S. Department of Education Federal Program Name: Higher Education Emergency Relief Fund Assistance Listing Number: 84.425E ? Higher Education Emergency Relief Fund ? Student Portion 84.425F ? Higher Education Emergency Relief Fund ? Institutional Portion Federal Award Identification Number and Year: P425E203131-20B and P425F203130-20B Type of Finding: ? Significant Deficiency in Internal Control over Compliance ? Other Matters Criteria or specific requirement: The 2 CFR Section 200.303 require that nonfederal entities receiving federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal Statutes, regulations, and the terms and conditions of the Federal awards. Additionally, the University was required to submit certain reports relating to their Higher Education Emergency Relief Fund (HEERF) during fiscal year 2022. Condition: During our testing, 1 out of 2 quarterly institutional and 2 out of 2 student quarterly reports, it was noted that the Vice President of Finance prepares the reports but no one reviews the reports before submission. Additionally, it was noted that these reports were not submitted timely. Finally, a few discrepancies were noted as it relates to numbers reported and their underlying support. Questioned costs: None Context: The University had inconsistencies between the student and institutional reports submitted, and the support provided. Cause: The HEERF funding is new to the University and given the complexity, the Vice President of Finance was the only knowledgeable person to prepare these reports. Effect: A few quarterly reports submitted had immaterial discrepancies. Three quarterly reports were also submitted late. Repeat Finding: Yes, Finding 2021-004. Auditor?s Recommendation: We recommend that the University review their policies surrounding federal grants and ensure a review process is in place to ensure that all necessary compliance requirements are met. Views of Responsible Officials and Planned Corrective Actions: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Education Federal Program Name: Higher Education Emergency Relief Fund Assistance Listing Number: 84.425E ? Higher Education Emergency Relief Fund ? Student Portion 84.425F ? Higher Education Emergency Relief Fund ? Institutional Portion Federal Award Identification Number and Year: P425E203131-20B and P425F203130-20B Type of Finding: ? Significant Deficiency in Internal Control over Compliance ? Other Matters Criteria or specific requirement: The 2 CFR Section 200.303 require that nonfederal entities receiving federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal Statutes, regulations, and the terms and conditions of the Federal awards. Additionally, the University was required to submit certain reports relating to their Higher Education Emergency Relief Fund (HEERF) during fiscal year 2022. Condition: During our testing, 1 out of 2 quarterly institutional and 2 out of 2 student quarterly reports, it was noted that the Vice President of Finance prepares the reports but no one reviews the reports before submission. Additionally, it was noted that these reports were not submitted timely. Finally, a few discrepancies were noted as it relates to numbers reported and their underlying support. Questioned costs: None Context: The University had inconsistencies between the student and institutional reports submitted, and the support provided. Cause: The HEERF funding is new to the University and given the complexity, the Vice President of Finance was the only knowledgeable person to prepare these reports. Effect: A few quarterly reports submitted had immaterial discrepancies. Three quarterly reports were also submitted late. Repeat Finding: Yes, Finding 2021-004. Auditor?s Recommendation: We recommend that the University review their policies surrounding federal grants and ensure a review process is in place to ensure that all necessary compliance requirements are met. Views of Responsible Officials and Planned Corrective Actions: There is no disagreement with the audit finding.
2022-002. FINDING: Enrollment Reporting Federal Department: U.S. Department of Education Assistance Listing Number: 84.268 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Direct Student Loans Award Numbers: P268K200567, P268K210567 Questioned Cost: None Program Expenditures: $22,967,948 Cluster Expenditures: $34,781,190 Governors State University (University) did not timely report student enrollment information to the U.S. Department of Education?s National Student Loan Data System (NSLDS). During our audit, we tested 40 students who experienced a change in enrollment status during the fiscal year. Our testing identified five students (13%) whose enrollment status change was not reported timely to the NSLDS. The student enrollment status changes were reported between 11 to 180 days late after the date of occurrence. The sample was not intended to be, and was not, a statistically valid sample. The Code of Federal Regulations (34 CFR 685.309) requires the University, upon the receipt of an enrollment report from the Secretary, to update all information included in the report and return the report to the Secretary within the timeframe prescribed by the Secretary. It further requires the University to report enrollment changes within 30 days unless a roster file is expected within 60 days, in which case the enrollment data may be updated on that roster file. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure timely student enrollment status reports are submitted to NSLDS. University officials stated the students noted were granted administrative withdrawal after the semester (the students registered for) ended, which resulted in these students not being reported as withdrawn during the semester they registered for. The students ?withdrawn? status was captured and reported to NSLDS in the subsequent reporting cycle, which was during the semester following the semester the students registered for. Enrollment reporting in a timely manner is critical for effective management of the student financial aid programs. Noncompliance with enrollment reporting regulations may result in a loss of future Federal funding. (Finding Code No. 2022-002, 2021-003).
2022-003. FINDING: Federal Perkins Loan Cohort Default Rate Too High Federal Department: U.S. Department of Education Assistance Listing Number: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College, and Higher Education Grants Award Numbers: P033A201156, P033A191156, P007A151156, P007A191156, P007A201156, P063P190567, P063P200567, P268K210567, P268K200567, P379T200567, and P379T210567 Questioned Cost: None Program Expenditures: $2,837,726; $467,499; $287,775; $6,964,315; $22,967,948; $14,145 Cluster Expenditures: $34,781,190 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan Cohort Default Rate for the past three years (Fiscal Years 2020, 2021, and 2022, for borrowers who entered repayment during Fiscal Years 2019, 2020, and 2021, respectively) is 19.38% which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? For institutions with less than 30 borrowers in the cohort for a fiscal year, cohort default rate is computed as the percentage of the total number of borrowers in that cohort and in the two most recent prior cohorts who are in default by the total number of borrowers in that cohort and the two most recent prior cohorts (34 CFR 668.202 (d)(2)(ii)). The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. University officials indicated they have met all due diligence requirements with regards to Perkins collections and have worked closely with the collection agency and with former students to facilitate loan consolidations, to reduce the cohort default rate. The University?s cohort default rate during the Fiscal Year 2022 (for borrowers who entered repayment during Fiscal Year 2021) was at 11.11%, meeting the 15% threshold. However, since the number of University borrowers who entered repayment during Fiscal Year 2021 were fewer than 30, the current cohort default rate calculation also included the University borrowers who entered into repayment and defaulted for the past three years, in accordance with federal regulations. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2022- 003, 2021-005, 2020-002, 2019-005, 2018-008, 2017-003, 2016-006)
2022-003. FINDING: Federal Perkins Loan Cohort Default Rate Too High Federal Department: U.S. Department of Education Assistance Listing Number: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College, and Higher Education Grants Award Numbers: P033A201156, P033A191156, P007A151156, P007A191156, P007A201156, P063P190567, P063P200567, P268K210567, P268K200567, P379T200567, and P379T210567 Questioned Cost: None Program Expenditures: $2,837,726; $467,499; $287,775; $6,964,315; $22,967,948; $14,145 Cluster Expenditures: $34,781,190 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan Cohort Default Rate for the past three years (Fiscal Years 2020, 2021, and 2022, for borrowers who entered repayment during Fiscal Years 2019, 2020, and 2021, respectively) is 19.38% which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? For institutions with less than 30 borrowers in the cohort for a fiscal year, cohort default rate is computed as the percentage of the total number of borrowers in that cohort and in the two most recent prior cohorts who are in default by the total number of borrowers in that cohort and the two most recent prior cohorts (34 CFR 668.202 (d)(2)(ii)). The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. University officials indicated they have met all due diligence requirements with regards to Perkins collections and have worked closely with the collection agency and with former students to facilitate loan consolidations, to reduce the cohort default rate. The University?s cohort default rate during the Fiscal Year 2022 (for borrowers who entered repayment during Fiscal Year 2021) was at 11.11%, meeting the 15% threshold. However, since the number of University borrowers who entered repayment during Fiscal Year 2021 were fewer than 30, the current cohort default rate calculation also included the University borrowers who entered into repayment and defaulted for the past three years, in accordance with federal regulations. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2022- 003, 2021-005, 2020-002, 2019-005, 2018-008, 2017-003, 2016-006)
2022-003. FINDING: Federal Perkins Loan Cohort Default Rate Too High Federal Department: U.S. Department of Education Assistance Listing Number: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College, and Higher Education Grants Award Numbers: P033A201156, P033A191156, P007A151156, P007A191156, P007A201156, P063P190567, P063P200567, P268K210567, P268K200567, P379T200567, and P379T210567 Questioned Cost: None Program Expenditures: $2,837,726; $467,499; $287,775; $6,964,315; $22,967,948; $14,145 Cluster Expenditures: $34,781,190 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan Cohort Default Rate for the past three years (Fiscal Years 2020, 2021, and 2022, for borrowers who entered repayment during Fiscal Years 2019, 2020, and 2021, respectively) is 19.38% which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? For institutions with less than 30 borrowers in the cohort for a fiscal year, cohort default rate is computed as the percentage of the total number of borrowers in that cohort and in the two most recent prior cohorts who are in default by the total number of borrowers in that cohort and the two most recent prior cohorts (34 CFR 668.202 (d)(2)(ii)). The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. University officials indicated they have met all due diligence requirements with regards to Perkins collections and have worked closely with the collection agency and with former students to facilitate loan consolidations, to reduce the cohort default rate. The University?s cohort default rate during the Fiscal Year 2022 (for borrowers who entered repayment during Fiscal Year 2021) was at 11.11%, meeting the 15% threshold. However, since the number of University borrowers who entered repayment during Fiscal Year 2021 were fewer than 30, the current cohort default rate calculation also included the University borrowers who entered into repayment and defaulted for the past three years, in accordance with federal regulations. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2022- 003, 2021-005, 2020-002, 2019-005, 2018-008, 2017-003, 2016-006)
2022-003. FINDING: Federal Perkins Loan Cohort Default Rate Too High Federal Department: U.S. Department of Education Assistance Listing Number: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College, and Higher Education Grants Award Numbers: P033A201156, P033A191156, P007A151156, P007A191156, P007A201156, P063P190567, P063P200567, P268K210567, P268K200567, P379T200567, and P379T210567 Questioned Cost: None Program Expenditures: $2,837,726; $467,499; $287,775; $6,964,315; $22,967,948; $14,145 Cluster Expenditures: $34,781,190 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan Cohort Default Rate for the past three years (Fiscal Years 2020, 2021, and 2022, for borrowers who entered repayment during Fiscal Years 2019, 2020, and 2021, respectively) is 19.38% which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? For institutions with less than 30 borrowers in the cohort for a fiscal year, cohort default rate is computed as the percentage of the total number of borrowers in that cohort and in the two most recent prior cohorts who are in default by the total number of borrowers in that cohort and the two most recent prior cohorts (34 CFR 668.202 (d)(2)(ii)). The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. University officials indicated they have met all due diligence requirements with regards to Perkins collections and have worked closely with the collection agency and with former students to facilitate loan consolidations, to reduce the cohort default rate. The University?s cohort default rate during the Fiscal Year 2022 (for borrowers who entered repayment during Fiscal Year 2021) was at 11.11%, meeting the 15% threshold. However, since the number of University borrowers who entered repayment during Fiscal Year 2021 were fewer than 30, the current cohort default rate calculation also included the University borrowers who entered into repayment and defaulted for the past three years, in accordance with federal regulations. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2022- 003, 2021-005, 2020-002, 2019-005, 2018-008, 2017-003, 2016-006)
2022-003. FINDING: Federal Perkins Loan Cohort Default Rate Too High Federal Department: U.S. Department of Education Assistance Listing Number: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College, and Higher Education Grants Award Numbers: P033A201156, P033A191156, P007A151156, P007A191156, P007A201156, P063P190567, P063P200567, P268K210567, P268K200567, P379T200567, and P379T210567 Questioned Cost: None Program Expenditures: $2,837,726; $467,499; $287,775; $6,964,315; $22,967,948; $14,145 Cluster Expenditures: $34,781,190 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan Cohort Default Rate for the past three years (Fiscal Years 2020, 2021, and 2022, for borrowers who entered repayment during Fiscal Years 2019, 2020, and 2021, respectively) is 19.38% which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? For institutions with less than 30 borrowers in the cohort for a fiscal year, cohort default rate is computed as the percentage of the total number of borrowers in that cohort and in the two most recent prior cohorts who are in default by the total number of borrowers in that cohort and the two most recent prior cohorts (34 CFR 668.202 (d)(2)(ii)). The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. University officials indicated they have met all due diligence requirements with regards to Perkins collections and have worked closely with the collection agency and with former students to facilitate loan consolidations, to reduce the cohort default rate. The University?s cohort default rate during the Fiscal Year 2022 (for borrowers who entered repayment during Fiscal Year 2021) was at 11.11%, meeting the 15% threshold. However, since the number of University borrowers who entered repayment during Fiscal Year 2021 were fewer than 30, the current cohort default rate calculation also included the University borrowers who entered into repayment and defaulted for the past three years, in accordance with federal regulations. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2022- 003, 2021-005, 2020-002, 2019-005, 2018-008, 2017-003, 2016-006)
2022-003. FINDING: Federal Perkins Loan Cohort Default Rate Too High Federal Department: U.S. Department of Education Assistance Listing Number: 84.038, 84.033, 84.007, 84.063, 84.268, 84.379 Cluster Name: Student Financial Assistance Cluster Program Name: Federal Perkins Loan Program ? Federal Capital Contributions, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grants, Federal Pell Grant Program, Federal Direct Student Loans, Teacher Education Assistance for College, and Higher Education Grants Award Numbers: P033A201156, P033A191156, P007A151156, P007A191156, P007A201156, P063P190567, P063P200567, P268K210567, P268K200567, P379T200567, and P379T210567 Questioned Cost: None Program Expenditures: $2,837,726; $467,499; $287,775; $6,964,315; $22,967,948; $14,145 Cluster Expenditures: $34,781,190 Governors State University?s (University) Federal Perkins loan cohort default rate is in excess of the threshold for administrative capability stipulated by the U.S. Department of Education. The Federal Perkins Loan Cohort Default Rate for the past three years (Fiscal Years 2020, 2021, and 2022, for borrowers who entered repayment during Fiscal Years 2019, 2020, and 2021, respectively) is 19.38% which exceeded the 15% threshold. The University chose to continue servicing their Perkins Loan portfolio after Federal Perkins Loan Program loan originations were discontinued in Fiscal Year 2018. The Code of Federal Regulations (Code) (34 CFR 668.16) states ?to begin and to continue to participate in any Title IV, HEA program, an institution shall demonstrate to the Secretary that the institution is capable of adequately administering that program under each of the standards established in this section. The Secretary considers an institution to have that administrative capability if the institution ? ... (m)(1) Has a cohort default rate - (iii) as defined in 34 CFR 674.5, on loans made under the Federal Perkins Loan Program to students for attendance at the institution that does not exceed 15 percent.? For institutions with less than 30 borrowers in the cohort for a fiscal year, cohort default rate is computed as the percentage of the total number of borrowers in that cohort and in the two most recent prior cohorts who are in default by the total number of borrowers in that cohort and the two most recent prior cohorts (34 CFR 668.202 (d)(2)(ii)). The U.S. Department of Education?s Dear Colleague Letter (DCL ID: GEN-17-10) states institutions that choose to continue to service their outstanding Perkins Loan portfolios must continue to service these loans in accordance with the Federal Perkins Loan Program regulations in 34 CFR 674. The Uniform Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Effective internal controls should include procedures to ensure the University maintains a Federal Perkins Loan cohort default rate of less than 15%. University officials indicated they have met all due diligence requirements with regards to Perkins collections and have worked closely with the collection agency and with former students to facilitate loan consolidations, to reduce the cohort default rate. The University?s cohort default rate during the Fiscal Year 2022 (for borrowers who entered repayment during Fiscal Year 2021) was at 11.11%, meeting the 15% threshold. However, since the number of University borrowers who entered repayment during Fiscal Year 2021 were fewer than 30, the current cohort default rate calculation also included the University borrowers who entered into repayment and defaulted for the past three years, in accordance with federal regulations. Failure to maintain a Federal Perkins Loan cohort default rate below 15% resulted in noncompliance with the Code, the Uniform Guidance, and the U.S. Department of Education?s directive. (Finding Code No. 2022- 003, 2021-005, 2020-002, 2019-005, 2018-008, 2017-003, 2016-006)
2022-001? Allowable Costs and Activities Federal agency: U.S. Department of Health and Human Services Federal program title: Provider Relief Fund Assistance Listing Number: 93.498 Award Period: Reporting Period 2 for Funds Received July 1, 2020 to December 31, 2020, Used through December 31, 2021 Type of Finding: Significant Deficiency in Internal Control Over Compliance and Other Matter Criteria or specific requirement: 2 CFR 200.303(a) established that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Makom did not have a formal policy for the provision of overnight stipend pay to eligible employees to document related controls and procedures in order to comply with federal awards. The Provider Relief Funds were provided under the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. No. 116-136, 134 Stat. 563) and are to be used to prevent, prepare for, and respond to coronavirus and that the funds shall reimburse the recipient only for health care related expenses or lost revenues that are attributable to coronavirus. Condition: The Jewish Foundation for Group Homes, Inc. (d.b.a. Makom) did not have documented policies and procedures for determining and providing overnight stipend pay. Such pay was tracked in detail and reviewed, with formal approval documented, but there was not a formal documented policy to ensure practical adherence in order to comply with federal awards. Questioned Costs: None Context: Makom maintained detailed records of federal funds applications for tracking and required reporting purposes. There was not, however, formal documentation of the Organization?s overnight stipend pay policy to comply with federal awards. Cause: Makom had not previously received federal awards in an amount sufficient to require an audit under Uniform Guidance. Therefore, more formal controls and procedures around the use of federal awards had not been in place. The Provider Relief Fund amounts received in response to the COVID-19 pandemic were an unexpected occurrence. As the relief funds were distributed to Makom, the focus of management and governance was on responding to the pandemic, and tracking use of related relief funds, and not necessarily incorporating formal policies and procedures. Effect: Without formal policies and procedures in place, there is a greater risk of inconsistent application of overnight stipend pay that could result in improper use of federal funds or misstatement in required federal reporting. Repeat finding: No Recommendation: We recommend that management develop and document clear and consistent policies and procedures for determining overnight stipend pay to improve the controls surrounding it and comply with federal awards. Views of responsible officials: There is no disagreement with the audit finding.
Federal agency: Department of Education Federal program title: Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425 Federal Award Identification Number and Year: P425F200639 - 2022 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: ? Compliance, Other Matter ? Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. The Department of Education requires grantees to conspicuously post quarterly reports on the institution?s website no later than 10 days after the calendar quarter. Effective internal controls should include procedures to ensure reports are properly reviewed and submitted timely. Condition: The University lacked documentation of supervisory review and did not submit quarterly reports timely. Context: During our testing of two student quarterly reports, from a statistically valid sample, we noted two reports lacked documentation of supervisory review and one report was uploaded to the University's website after the required due date. During our testing of two institutional quarterly reports, from a statistically valid sample, we noted one report lacked documentation of supervisory review and two reports were uploaded to the University's website after the required due date. Questioned costs: None. Cause: Staffing shortages led to delays in timely posting of the reports on the University?s website and documentation of supervisory review of the reports. Effect: Lack of supervisory review could result in errors in the filed reports. The failure to timely submit required reports may lead to adverse action. Repeat Finding: No. Recommendation: We recommend that the University review and update current procedures to ensure HEERF program reporting requirements are completed timely and to ensure review of reports are documented. Views of responsible officials: There is no disagreement with the audit finding.
Federal agency: Department of Education Federal program title: Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425 Federal Award Identification Number and Year: P425F200639 - 2022 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: ? Compliance, Other Matter ? Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. The Department of Education requires grantees to conspicuously post quarterly reports on the institution?s website no later than 10 days after the calendar quarter. Effective internal controls should include procedures to ensure reports are properly reviewed and submitted timely. Condition: The University lacked documentation of supervisory review and did not submit quarterly reports timely. Context: During our testing of two student quarterly reports, from a statistically valid sample, we noted two reports lacked documentation of supervisory review and one report was uploaded to the University's website after the required due date. During our testing of two institutional quarterly reports, from a statistically valid sample, we noted one report lacked documentation of supervisory review and two reports were uploaded to the University's website after the required due date. Questioned costs: None. Cause: Staffing shortages led to delays in timely posting of the reports on the University?s website and documentation of supervisory review of the reports. Effect: Lack of supervisory review could result in errors in the filed reports. The failure to timely submit required reports may lead to adverse action. Repeat Finding: No. Recommendation: We recommend that the University review and update current procedures to ensure HEERF program reporting requirements are completed timely and to ensure review of reports are documented. Views of responsible officials: There is no disagreement with the audit finding.
Federal agency: Department of Education Federal program title: Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425 Federal Award Identification Number and Year: P425F200639 - 2022 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: ? Compliance, Other Matter ? Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. The Department of Education requires grantees to conspicuously post quarterly reports on the institution?s website no later than 10 days after the calendar quarter. Effective internal controls should include procedures to ensure reports are properly reviewed and submitted timely. Condition: The University lacked documentation of supervisory review and did not submit quarterly reports timely. Context: During our testing of two student quarterly reports, from a statistically valid sample, we noted two reports lacked documentation of supervisory review and one report was uploaded to the University's website after the required due date. During our testing of two institutional quarterly reports, from a statistically valid sample, we noted one report lacked documentation of supervisory review and two reports were uploaded to the University's website after the required due date. Questioned costs: None. Cause: Staffing shortages led to delays in timely posting of the reports on the University?s website and documentation of supervisory review of the reports. Effect: Lack of supervisory review could result in errors in the filed reports. The failure to timely submit required reports may lead to adverse action. Repeat Finding: No. Recommendation: We recommend that the University review and update current procedures to ensure HEERF program reporting requirements are completed timely and to ensure review of reports are documented. Views of responsible officials: There is no disagreement with the audit finding.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, 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 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-006. Condition and Context 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. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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 micropurchase 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. Micro-Purchases A sample of 40 micro-purchase procurements from the School Lunch fund was selected for testing to verify proper procurement methods were followed. There were 11 micro-purchase procurements, totaling $7,602, that were paid for which the School Corporation could not provide documentation to support the purchase. As such, the 11 transactions could not be verified as properly procured. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 24 micro-purchase procurements. Small Purchases The School Corporation could not provide supporting documentation that an adequate number of price or rate quotes was obtained to ensure full and open competition for two of six procurements under the small purchase threshold. Furthermore, vendor contracts were not entered into for two total purchases above $50,000 as required by state statute. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. Exceeds Simplified Acquisition The School Corporation did not follow procurement requirements for purchases of commodities which exceeded the simplified acquisition threshold of $150,000. The School Corporation could not provide supporting documentation that a contract was procured for Gordon Food Service for fiscal year 2020-2021. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. The lack of internal controls, availability of supporting documentation, 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) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 nonFederal entity's documented procurement procedures must confirm to the procurement standards identified in ?? 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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: (1) Micro-purchases - (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold ( . . . ? 200.1) To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. . . . (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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . . Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 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 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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with compliance requirement listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, 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 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-006. Condition and Context 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. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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 micropurchase 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. Micro-Purchases A sample of 40 micro-purchase procurements from the School Lunch fund was selected for testing to verify proper procurement methods were followed. There were 11 micro-purchase procurements, totaling $7,602, that were paid for which the School Corporation could not provide documentation to support the purchase. As such, the 11 transactions could not be verified as properly procured. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 24 micro-purchase procurements. Small Purchases The School Corporation could not provide supporting documentation that an adequate number of price or rate quotes was obtained to ensure full and open competition for two of six procurements under the small purchase threshold. Furthermore, vendor contracts were not entered into for two total purchases above $50,000 as required by state statute. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. Exceeds Simplified Acquisition The School Corporation did not follow procurement requirements for purchases of commodities which exceeded the simplified acquisition threshold of $150,000. The School Corporation could not provide supporting documentation that a contract was procured for Gordon Food Service for fiscal year 2020-2021. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. The lack of internal controls, availability of supporting documentation, 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) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 nonFederal entity's documented procurement procedures must confirm to the procurement standards identified in ?? 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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: (1) Micro-purchases - (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold ( . . . ? 200.1) To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. . . . (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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . . Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 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 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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with compliance requirement listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, 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 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-006. Condition and Context 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. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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 micropurchase 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. Micro-Purchases A sample of 40 micro-purchase procurements from the School Lunch fund was selected for testing to verify proper procurement methods were followed. There were 11 micro-purchase procurements, totaling $7,602, that were paid for which the School Corporation could not provide documentation to support the purchase. As such, the 11 transactions could not be verified as properly procured. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 24 micro-purchase procurements. Small Purchases The School Corporation could not provide supporting documentation that an adequate number of price or rate quotes was obtained to ensure full and open competition for two of six procurements under the small purchase threshold. Furthermore, vendor contracts were not entered into for two total purchases above $50,000 as required by state statute. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. Exceeds Simplified Acquisition The School Corporation did not follow procurement requirements for purchases of commodities which exceeded the simplified acquisition threshold of $150,000. The School Corporation could not provide supporting documentation that a contract was procured for Gordon Food Service for fiscal year 2020-2021. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. The lack of internal controls, availability of supporting documentation, 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) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 nonFederal entity's documented procurement procedures must confirm to the procurement standards identified in ?? 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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: (1) Micro-purchases - (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold ( . . . ? 200.1) To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. . . . (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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . . Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 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 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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with compliance requirement listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, 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 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-006. Condition and Context 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. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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 micropurchase 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. Micro-Purchases A sample of 40 micro-purchase procurements from the School Lunch fund was selected for testing to verify proper procurement methods were followed. There were 11 micro-purchase procurements, totaling $7,602, that were paid for which the School Corporation could not provide documentation to support the purchase. As such, the 11 transactions could not be verified as properly procured. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 24 micro-purchase procurements. Small Purchases The School Corporation could not provide supporting documentation that an adequate number of price or rate quotes was obtained to ensure full and open competition for two of six procurements under the small purchase threshold. Furthermore, vendor contracts were not entered into for two total purchases above $50,000 as required by state statute. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. Exceeds Simplified Acquisition The School Corporation did not follow procurement requirements for purchases of commodities which exceeded the simplified acquisition threshold of $150,000. The School Corporation could not provide supporting documentation that a contract was procured for Gordon Food Service for fiscal year 2020-2021. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. The lack of internal controls, availability of supporting documentation, 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) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 nonFederal entity's documented procurement procedures must confirm to the procurement standards identified in ?? 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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: (1) Micro-purchases - (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold ( . . . ? 200.1) To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. . . . (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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . . Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 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 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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with compliance requirement listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, 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 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-006. Condition and Context 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. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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 micropurchase 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. Micro-Purchases A sample of 40 micro-purchase procurements from the School Lunch fund was selected for testing to verify proper procurement methods were followed. There were 11 micro-purchase procurements, totaling $7,602, that were paid for which the School Corporation could not provide documentation to support the purchase. As such, the 11 transactions could not be verified as properly procured. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 24 micro-purchase procurements. Small Purchases The School Corporation could not provide supporting documentation that an adequate number of price or rate quotes was obtained to ensure full and open competition for two of six procurements under the small purchase threshold. Furthermore, vendor contracts were not entered into for two total purchases above $50,000 as required by state statute. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. Exceeds Simplified Acquisition The School Corporation did not follow procurement requirements for purchases of commodities which exceeded the simplified acquisition threshold of $150,000. The School Corporation could not provide supporting documentation that a contract was procured for Gordon Food Service for fiscal year 2020-2021. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. The lack of internal controls, availability of supporting documentation, 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) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 nonFederal entity's documented procurement procedures must confirm to the procurement standards identified in ?? 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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: (1) Micro-purchases - (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold ( . . . ? 200.1) To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. . . . (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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . . Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 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 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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with compliance requirement listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, 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 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-006. Condition and Context 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. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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 micropurchase 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. Micro-Purchases A sample of 40 micro-purchase procurements from the School Lunch fund was selected for testing to verify proper procurement methods were followed. There were 11 micro-purchase procurements, totaling $7,602, that were paid for which the School Corporation could not provide documentation to support the purchase. As such, the 11 transactions could not be verified as properly procured. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 24 micro-purchase procurements. Small Purchases The School Corporation could not provide supporting documentation that an adequate number of price or rate quotes was obtained to ensure full and open competition for two of six procurements under the small purchase threshold. Furthermore, vendor contracts were not entered into for two total purchases above $50,000 as required by state statute. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. Exceeds Simplified Acquisition The School Corporation did not follow procurement requirements for purchases of commodities which exceeded the simplified acquisition threshold of $150,000. The School Corporation could not provide supporting documentation that a contract was procured for Gordon Food Service for fiscal year 2020-2021. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. The lack of internal controls, availability of supporting documentation, 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) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 nonFederal entity's documented procurement procedures must confirm to the procurement standards identified in ?? 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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: (1) Micro-purchases - (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold ( . . . ? 200.1) To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. . . . (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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . . Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 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 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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with compliance requirement listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, 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 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-006. Condition and Context 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. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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 micropurchase 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. Micro-Purchases A sample of 40 micro-purchase procurements from the School Lunch fund was selected for testing to verify proper procurement methods were followed. There were 11 micro-purchase procurements, totaling $7,602, that were paid for which the School Corporation could not provide documentation to support the purchase. As such, the 11 transactions could not be verified as properly procured. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 24 micro-purchase procurements. Small Purchases The School Corporation could not provide supporting documentation that an adequate number of price or rate quotes was obtained to ensure full and open competition for two of six procurements under the small purchase threshold. Furthermore, vendor contracts were not entered into for two total purchases above $50,000 as required by state statute. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. Exceeds Simplified Acquisition The School Corporation did not follow procurement requirements for purchases of commodities which exceeded the simplified acquisition threshold of $150,000. The School Corporation could not provide supporting documentation that a contract was procured for Gordon Food Service for fiscal year 2020-2021. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. The lack of internal controls, availability of supporting documentation, 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) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 nonFederal entity's documented procurement procedures must confirm to the procurement standards identified in ?? 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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: (1) Micro-purchases - (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold ( . . . ? 200.1) To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. . . . (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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . . Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 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 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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with compliance requirement listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, 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 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-006. Condition and Context 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. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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 micropurchase 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. Micro-Purchases A sample of 40 micro-purchase procurements from the School Lunch fund was selected for testing to verify proper procurement methods were followed. There were 11 micro-purchase procurements, totaling $7,602, that were paid for which the School Corporation could not provide documentation to support the purchase. As such, the 11 transactions could not be verified as properly procured. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 24 micro-purchase procurements. Small Purchases The School Corporation could not provide supporting documentation that an adequate number of price or rate quotes was obtained to ensure full and open competition for two of six procurements under the small purchase threshold. Furthermore, vendor contracts were not entered into for two total purchases above $50,000 as required by state statute. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. Exceeds Simplified Acquisition The School Corporation did not follow procurement requirements for purchases of commodities which exceeded the simplified acquisition threshold of $150,000. The School Corporation could not provide supporting documentation that a contract was procured for Gordon Food Service for fiscal year 2020-2021. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. The lack of internal controls, availability of supporting documentation, 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) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 nonFederal entity's documented procurement procedures must confirm to the procurement standards identified in ?? 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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: (1) Micro-purchases - (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold ( . . . ? 200.1) To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. . . . (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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . . Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 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 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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with compliance requirement listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, 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 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-006. Condition and Context 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. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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 micropurchase 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. Micro-Purchases A sample of 40 micro-purchase procurements from the School Lunch fund was selected for testing to verify proper procurement methods were followed. There were 11 micro-purchase procurements, totaling $7,602, that were paid for which the School Corporation could not provide documentation to support the purchase. As such, the 11 transactions could not be verified as properly procured. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 24 micro-purchase procurements. Small Purchases The School Corporation could not provide supporting documentation that an adequate number of price or rate quotes was obtained to ensure full and open competition for two of six procurements under the small purchase threshold. Furthermore, vendor contracts were not entered into for two total purchases above $50,000 as required by state statute. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. Exceeds Simplified Acquisition The School Corporation did not follow procurement requirements for purchases of commodities which exceeded the simplified acquisition threshold of $150,000. The School Corporation could not provide supporting documentation that a contract was procured for Gordon Food Service for fiscal year 2020-2021. As a result, vendors subject to contracts were not verified for suspension and debarment to ensure vendors were not suspended or debarred from participation in federal award programs. The lack of internal controls, availability of supporting documentation, 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) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 nonFederal entity's documented procurement procedures must confirm to the procurement standards identified in ?? 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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: (1) Micro-purchases - (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold ( . . . ? 200.1) To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. . . . (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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . . Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 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 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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with compliance requirement listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-005 Subject: Special Education Cluster (IDEA) - Internal Controls Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-014-PN01,19619-014 PN01, 20611-014-PN01, 20619-014-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Cash Management Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-009. Condition and Context The School Corporation had not properly designed or implemented an effective system of internal controls to prevent, or detect and correct, noncompliance. Although reimbursement requests were prepared by the Grant Manager and reviewed by the Treasurer the documentation, or lack thereof, that accompanied the reimbursement requests did not provide sufficient detail to know if expenses were paid prior to requesting reimbursement. The lack of internal controls was a systemic issue 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). . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance with the grant agreement and the Cash Management compliance requirement. Effect The failure to design and implement an effective system of internal controls placed the School Corporation at risk of noncompliance with the grant agreement and the Cash Management compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls related to the grant agreement and the Cash Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-006 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-014-PN01, 19619-014-PN01, 20611-014-PN01, 20619-014-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-011. Condition and Context The School Corporation had not established an effective internal control system to ensure the earmarking requirements for the Coordinated Early Intervening Services (CEIS) and the Non-Public Proportionate Share were met. Coordinated Early Intervening Services (CEIS) When an LEA is identified with significant disproportionality, they are required to expend exactly 15 percent of their total combined 611 and 619 allocation on CEIS expenses. The School Corporation had a mandatory CEIS amount of $254,650 for the 19611-014-PN01 grant. Per the submitted CEIS monitoring report, expenses related to CEIS were $273,292; however, no supporting documentation was provided with the report to substantiate this amount. Furthermore, the ledgers had expenses of $324,522 related to CEIS. As such we could not determine the amount spent for CEIS. Additionally, no documented review of the CEIS amounts expended was provided for audit to ensure the School Corporation would meet, but not exceed the required amount. The lack of internal controls, availability of supporting documentation, and noncompliance were isolated to the 19611-014-PN01 grant award. Non-Public Proportionate Share Proportionate share is an amount of funds that must be expended on special education or related services for parentally-placed private school and homeschooled students. Supporting documentation was not provided to substantiate the amounts reported as expensed for the nonpublic students. However, based on the expenses reported in the ledgers related to nonpublic schools, the required earmarking amounts for nonpublic proportionate share for the 19619-014-PN01, 20611-014-PN01, or 20619-014-PN01 grants was not spent. Additionally, no documented review of the amounts expended for proportionate share was provided for audit to ensure the School Corporation would spend the required amount. The lack of internal controls, availability of supporting documentation, and noncompliance were isolated to the 19619-014-PN01, 20611-014-PN01, and 20619-014-PN01 grant awards. 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). . . ." 34 CFR 300.226(a) states: "General. An LEA may not use more than 15 percent of the amount the LEA receives under Part B of the Act for any fiscal year, less any amount reduced by the LEA pursuant to ? 300.205, if any, in combination with other amounts (which may include amounts other than education funds), to develop and implement coordinated, early intervening services, which may include interagency financing structures, for students in kindergarten through grade 12 (with a particular emphasis on students in kindergarten through grade three) who are not currently identified as needing special education or related services, but who need additional academic and behavioral support to succeed in a general education environment. (See appendix D for examples of how ? 300.205(d), regarding local maintenance of effort, and ? 300.226(a) affect one another.)" 2 CFR 200.207(a) states in part: "The Federal awarding agency or pass-through entity may impose additional specific award conditions as needed. . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools and facilities, must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools or facilities within its boundaries, is to the total number of students with disabilities of the same age range." Cause Management had not established an effective system of internal controls that would have ensured compliance, or that supporting documentation would have been maintained and made available for audit, with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Effect The failure to design and implement an effective system of internal controls and to retain supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirement listed above. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Matching, Level of Effort, Earmarking, compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-007 Subject: Special Education Cluster (IDEA) - Reporting Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-014-PN01, 19619-014-PN01, 20611-014-PN01, 20619-014-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context Reimbursement requests are submitted through the Indiana Department of Education information portal after review by the Executive Director of the Elkhart County Special Education Cooperative and the School Corporation's Treasurer. Supporting documentation was not provided to substantiate the amounts reported on the reimbursement requests. Ledgers provided during the audit were used to determine amounts requested by abstracting the expenses for each Special Education Fund. However, upon testing of the reimbursement requests it was determined that the documentation, or lack thereof, accompanying the reimbursement requests was not sufficient to prevent or detect noncompliance. Therefore, an internal control had not been properly designed and implemented. ? 19611-014-PN01 - Reimbursement request totaled $105,205, and ledger detail provided for audit totaled $110,703, with a variance of $5,498 recorded in the ledger but not requested for reimbursement. ? 20611-014-PN01 - Reimbursement request totaled $638,466, and ledger detail provided for audit totaled $597,441, with a variance of $41,025 over requested on the reimbursement. ? 19619-014-PN01 - Reimbursement request totaled $71,486, and ledger detail provided for audit totaled $69,527, with a variance of $1,959 over requested on the reimbursement. ? 20619-014-PN01 - Reimbursement request totaled $72,589, and ledger detail provided for audit totaled $72,031, with a variance of $558 over requested on the reimbursement. The lack of internal controls, availability of supporting documentation, 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 200.207(a) states in part: "The Federal awarding agency or pass-through entity may impose additional specific award conditions as needed, . . ." 2 CFR 200.327 states: "Unless otherwise approved by OMB, the Federal awarding agency may solicit only the standard, OMB-approved governmentwide data elements for collection of financial information (at time of publication the Federal Financial Report or such future collections as may be approved by OMB and listed on the OMB Web site). This information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes, and preferably in coordination with performance reporting." Cause Management had not established an effective system of internal controls that would have ensured compliance, or that supporting documentation would have been maintained and made available for audit, with the grant agreement and the Reporting compliance requirement. Effect The failure to design and implement an effective internal control system and to retain supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirement listed above. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-005 Subject: Special Education Cluster (IDEA) - Internal Controls Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-014-PN01,19619-014 PN01, 20611-014-PN01, 20619-014-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Cash Management Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2020-009. Condition and Context The School Corporation had not properly designed or implemented an effective system of internal controls to prevent, or detect and correct, noncompliance. Although reimbursement requests were prepared by the Grant Manager and reviewed by the Treasurer the documentation, or lack thereof, that accompanied the reimbursement requests did not provide sufficient detail to know if expenses were paid prior to requesting reimbursement. The lack of internal controls was a systemic issue 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). . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance with the grant agreement and the Cash Management compliance requirement. Effect The failure to design and implement an effective system of internal controls placed the School Corporation at risk of noncompliance with the grant agreement and the Cash Management compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls related to the grant agreement and the Cash Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.