FINDING 2024-006 Subject: COVID-19 - Education Stabilization Fund - Internal Controls Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425C, 84.425D, 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425C200018, S425D210013, S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed Audit Finding: Material Weakness Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal controls over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. The lack of controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 29 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-007 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 30 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was a participating member in The Exceptional Children's Cooperative (Cooperative) which provided special education services to students on behalf of the School Corporation. The School Corporation utilized $15,672 in program funds to pay for a portion of the School Corporation's required obligations to the Cooperative. This arrangement existed prior to the pandemic, and none of the obligations were related to responding to the pandemic. Additionally, the School Corporation used $12,000 in program funds to pay a retainer fee for information technology services on a contract that existed prior to the COVID-19 pandemic. The School Corporation also used $147,809 in program funds to pay the salary and benefits of a certified staff member who was employed prior to the pandemic and whose job duties were not related to responding to the pandemic. We consider the total of these payments, $175,481, to be questioned costs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 31 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) American Rescue Plan Act section 2001(e) states in part: "Uses of Funds. - A local education agency that receives funds under this section - . . . (2) shall use the remaining funds for any of the following: . . . (E) Coordination of preparedness and response efforts of local education agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. . . . (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 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. . . . (g) be adequately documented. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation's management had not developed a system of internal controls to ensure that expenditures paid from COVID-19 - Education Stabilization Funds were for costs allowed by the grant terms and conditions and in compliance with the allowable cost principles. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Without a proper system of internal controls in place that operated effectively, material noncompliance that resulted in questioned costs remained undetected. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 32 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs Questioned costs in the amount of $175,481 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for cost allowed per the terms and conditions of the federal award and in compliance with the allowable cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-007 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 30 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was a participating member in The Exceptional Children's Cooperative (Cooperative) which provided special education services to students on behalf of the School Corporation. The School Corporation utilized $15,672 in program funds to pay for a portion of the School Corporation's required obligations to the Cooperative. This arrangement existed prior to the pandemic, and none of the obligations were related to responding to the pandemic. Additionally, the School Corporation used $12,000 in program funds to pay a retainer fee for information technology services on a contract that existed prior to the COVID-19 pandemic. The School Corporation also used $147,809 in program funds to pay the salary and benefits of a certified staff member who was employed prior to the pandemic and whose job duties were not related to responding to the pandemic. We consider the total of these payments, $175,481, to be questioned costs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 31 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) American Rescue Plan Act section 2001(e) states in part: "Uses of Funds. - A local education agency that receives funds under this section - . . . (2) shall use the remaining funds for any of the following: . . . (E) Coordination of preparedness and response efforts of local education agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. . . . (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 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. . . . (g) be adequately documented. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation's management had not developed a system of internal controls to ensure that expenditures paid from COVID-19 - Education Stabilization Funds were for costs allowed by the grant terms and conditions and in compliance with the allowable cost principles. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Without a proper system of internal controls in place that operated effectively, material noncompliance that resulted in questioned costs remained undetected. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 32 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs Questioned costs in the amount of $175,481 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for cost allowed per the terms and conditions of the federal award and in compliance with the allowable cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-007 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 30 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was a participating member in The Exceptional Children's Cooperative (Cooperative) which provided special education services to students on behalf of the School Corporation. The School Corporation utilized $15,672 in program funds to pay for a portion of the School Corporation's required obligations to the Cooperative. This arrangement existed prior to the pandemic, and none of the obligations were related to responding to the pandemic. Additionally, the School Corporation used $12,000 in program funds to pay a retainer fee for information technology services on a contract that existed prior to the COVID-19 pandemic. The School Corporation also used $147,809 in program funds to pay the salary and benefits of a certified staff member who was employed prior to the pandemic and whose job duties were not related to responding to the pandemic. We consider the total of these payments, $175,481, to be questioned costs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 31 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) American Rescue Plan Act section 2001(e) states in part: "Uses of Funds. - A local education agency that receives funds under this section - . . . (2) shall use the remaining funds for any of the following: . . . (E) Coordination of preparedness and response efforts of local education agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. . . . (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 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. . . . (g) be adequately documented. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation's management had not developed a system of internal controls to ensure that expenditures paid from COVID-19 - Education Stabilization Funds were for costs allowed by the grant terms and conditions and in compliance with the allowable cost principles. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Without a proper system of internal controls in place that operated effectively, material noncompliance that resulted in questioned costs remained undetected. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 32 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs Questioned costs in the amount of $175,481 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for cost allowed per the terms and conditions of the federal award and in compliance with the allowable cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-007 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 30 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was a participating member in The Exceptional Children's Cooperative (Cooperative) which provided special education services to students on behalf of the School Corporation. The School Corporation utilized $15,672 in program funds to pay for a portion of the School Corporation's required obligations to the Cooperative. This arrangement existed prior to the pandemic, and none of the obligations were related to responding to the pandemic. Additionally, the School Corporation used $12,000 in program funds to pay a retainer fee for information technology services on a contract that existed prior to the COVID-19 pandemic. The School Corporation also used $147,809 in program funds to pay the salary and benefits of a certified staff member who was employed prior to the pandemic and whose job duties were not related to responding to the pandemic. We consider the total of these payments, $175,481, to be questioned costs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 31 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) American Rescue Plan Act section 2001(e) states in part: "Uses of Funds. - A local education agency that receives funds under this section - . . . (2) shall use the remaining funds for any of the following: . . . (E) Coordination of preparedness and response efforts of local education agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. . . . (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 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. . . . (g) be adequately documented. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation's management had not developed a system of internal controls to ensure that expenditures paid from COVID-19 - Education Stabilization Funds were for costs allowed by the grant terms and conditions and in compliance with the allowable cost principles. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Without a proper system of internal controls in place that operated effectively, material noncompliance that resulted in questioned costs remained undetected. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 32 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs Questioned costs in the amount of $175,481 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for cost allowed per the terms and conditions of the federal award and in compliance with the allowable cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-008 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425C, 84.425D, 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425C200018, S425D210013, S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. INDIANA STATE BOARD OF ACCOUNTS 33 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and key line items such as "Number of Specific Positions Supported with ESSER Funds," "Allocation of ESSER funds . . . ," "LEA expenditures by ESSER Subgrant fund . . . ," and "Full-Time Equivalency Positions." As part of sound management of the federal award, the School Corporation was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The School Corporation had not properly designed or implemented such a system, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. During the audit period, the School Corporation submitted one ESSER I report, two ESSER II reports, two ESSER III reports, and one ARP HCY II Report, for a total of six reports. There was no evidence of an oversight, review, or approval process to prevent, or detect and correct, errors prior to submission. All six reports were selected for testing. Four of the reports were not supported by the School Corporation's records, and their accuracy and completeness could not be verified. The following errors were identified: The ESSER II, Year 2 and Year 3 reports, which covered the periods of July 1, 2021 to June 30, 2022, and July 1, 2022 to June 30, 2023, respectively, Key Line Items were not able to be traced to supporting documentation. For both reports, the supplies line item could not be traced to the School Corporation's records. For ESSER II, Year 3, the School Corporation reported Other Purchased Services, but the School Corporation's supporting documentation did not include any items that would be classified as such. The ESSER III, Year 2 report, which covered the period of July 1, 2021 to June 30, 2022, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported the purchase of Chromebooks as Purchased Property Services, which was not the appropriate classification for the expenditure. The ESSER III, Year 3 report, which covered the period of July 1, 2022 to June 30, 2023, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported amounts related to Purchased Property Services and Personnel Services - Salaries that were not supported by the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 34 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not act upon its corrective action plan submitted in response to the same finding included in the prior audit and did not take further steps to ensure compliance. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, due to a lack of review and segregation of duties, the School Corporation submitted ESSER II and ESSER III reports that were not supported by the School Corporation's records. As a result, material noncompliance occurred and remained undetected. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 35 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls and strengthen its policies and procedures to ensure all reports submitted are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-008 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425C, 84.425D, 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425C200018, S425D210013, S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. INDIANA STATE BOARD OF ACCOUNTS 33 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and key line items such as "Number of Specific Positions Supported with ESSER Funds," "Allocation of ESSER funds . . . ," "LEA expenditures by ESSER Subgrant fund . . . ," and "Full-Time Equivalency Positions." As part of sound management of the federal award, the School Corporation was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The School Corporation had not properly designed or implemented such a system, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. During the audit period, the School Corporation submitted one ESSER I report, two ESSER II reports, two ESSER III reports, and one ARP HCY II Report, for a total of six reports. There was no evidence of an oversight, review, or approval process to prevent, or detect and correct, errors prior to submission. All six reports were selected for testing. Four of the reports were not supported by the School Corporation's records, and their accuracy and completeness could not be verified. The following errors were identified: The ESSER II, Year 2 and Year 3 reports, which covered the periods of July 1, 2021 to June 30, 2022, and July 1, 2022 to June 30, 2023, respectively, Key Line Items were not able to be traced to supporting documentation. For both reports, the supplies line item could not be traced to the School Corporation's records. For ESSER II, Year 3, the School Corporation reported Other Purchased Services, but the School Corporation's supporting documentation did not include any items that would be classified as such. The ESSER III, Year 2 report, which covered the period of July 1, 2021 to June 30, 2022, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported the purchase of Chromebooks as Purchased Property Services, which was not the appropriate classification for the expenditure. The ESSER III, Year 3 report, which covered the period of July 1, 2022 to June 30, 2023, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported amounts related to Purchased Property Services and Personnel Services - Salaries that were not supported by the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 34 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not act upon its corrective action plan submitted in response to the same finding included in the prior audit and did not take further steps to ensure compliance. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, due to a lack of review and segregation of duties, the School Corporation submitted ESSER II and ESSER III reports that were not supported by the School Corporation's records. As a result, material noncompliance occurred and remained undetected. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 35 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls and strengthen its policies and procedures to ensure all reports submitted are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-008 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425C, 84.425D, 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425C200018, S425D210013, S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. INDIANA STATE BOARD OF ACCOUNTS 33 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and key line items such as "Number of Specific Positions Supported with ESSER Funds," "Allocation of ESSER funds . . . ," "LEA expenditures by ESSER Subgrant fund . . . ," and "Full-Time Equivalency Positions." As part of sound management of the federal award, the School Corporation was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The School Corporation had not properly designed or implemented such a system, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. During the audit period, the School Corporation submitted one ESSER I report, two ESSER II reports, two ESSER III reports, and one ARP HCY II Report, for a total of six reports. There was no evidence of an oversight, review, or approval process to prevent, or detect and correct, errors prior to submission. All six reports were selected for testing. Four of the reports were not supported by the School Corporation's records, and their accuracy and completeness could not be verified. The following errors were identified: The ESSER II, Year 2 and Year 3 reports, which covered the periods of July 1, 2021 to June 30, 2022, and July 1, 2022 to June 30, 2023, respectively, Key Line Items were not able to be traced to supporting documentation. For both reports, the supplies line item could not be traced to the School Corporation's records. For ESSER II, Year 3, the School Corporation reported Other Purchased Services, but the School Corporation's supporting documentation did not include any items that would be classified as such. The ESSER III, Year 2 report, which covered the period of July 1, 2021 to June 30, 2022, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported the purchase of Chromebooks as Purchased Property Services, which was not the appropriate classification for the expenditure. The ESSER III, Year 3 report, which covered the period of July 1, 2022 to June 30, 2023, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported amounts related to Purchased Property Services and Personnel Services - Salaries that were not supported by the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 34 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not act upon its corrective action plan submitted in response to the same finding included in the prior audit and did not take further steps to ensure compliance. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, due to a lack of review and segregation of duties, the School Corporation submitted ESSER II and ESSER III reports that were not supported by the School Corporation's records. As a result, material noncompliance occurred and remained undetected. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 35 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls and strengthen its policies and procedures to ensure all reports submitted are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-008 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425C, 84.425D, 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425C200018, S425D210013, S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. INDIANA STATE BOARD OF ACCOUNTS 33 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and key line items such as "Number of Specific Positions Supported with ESSER Funds," "Allocation of ESSER funds . . . ," "LEA expenditures by ESSER Subgrant fund . . . ," and "Full-Time Equivalency Positions." As part of sound management of the federal award, the School Corporation was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The School Corporation had not properly designed or implemented such a system, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. During the audit period, the School Corporation submitted one ESSER I report, two ESSER II reports, two ESSER III reports, and one ARP HCY II Report, for a total of six reports. There was no evidence of an oversight, review, or approval process to prevent, or detect and correct, errors prior to submission. All six reports were selected for testing. Four of the reports were not supported by the School Corporation's records, and their accuracy and completeness could not be verified. The following errors were identified: The ESSER II, Year 2 and Year 3 reports, which covered the periods of July 1, 2021 to June 30, 2022, and July 1, 2022 to June 30, 2023, respectively, Key Line Items were not able to be traced to supporting documentation. For both reports, the supplies line item could not be traced to the School Corporation's records. For ESSER II, Year 3, the School Corporation reported Other Purchased Services, but the School Corporation's supporting documentation did not include any items that would be classified as such. The ESSER III, Year 2 report, which covered the period of July 1, 2021 to June 30, 2022, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported the purchase of Chromebooks as Purchased Property Services, which was not the appropriate classification for the expenditure. The ESSER III, Year 3 report, which covered the period of July 1, 2022 to June 30, 2023, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported amounts related to Purchased Property Services and Personnel Services - Salaries that were not supported by the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 34 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not act upon its corrective action plan submitted in response to the same finding included in the prior audit and did not take further steps to ensure compliance. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, due to a lack of review and segregation of duties, the School Corporation submitted ESSER II and ESSER III reports that were not supported by the School Corporation's records. As a result, material noncompliance occurred and remained undetected. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 35 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls and strengthen its policies and procedures to ensure all reports submitted are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-008 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425C, 84.425D, 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425C200018, S425D210013, S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. INDIANA STATE BOARD OF ACCOUNTS 33 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and key line items such as "Number of Specific Positions Supported with ESSER Funds," "Allocation of ESSER funds . . . ," "LEA expenditures by ESSER Subgrant fund . . . ," and "Full-Time Equivalency Positions." As part of sound management of the federal award, the School Corporation was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The School Corporation had not properly designed or implemented such a system, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. During the audit period, the School Corporation submitted one ESSER I report, two ESSER II reports, two ESSER III reports, and one ARP HCY II Report, for a total of six reports. There was no evidence of an oversight, review, or approval process to prevent, or detect and correct, errors prior to submission. All six reports were selected for testing. Four of the reports were not supported by the School Corporation's records, and their accuracy and completeness could not be verified. The following errors were identified: The ESSER II, Year 2 and Year 3 reports, which covered the periods of July 1, 2021 to June 30, 2022, and July 1, 2022 to June 30, 2023, respectively, Key Line Items were not able to be traced to supporting documentation. For both reports, the supplies line item could not be traced to the School Corporation's records. For ESSER II, Year 3, the School Corporation reported Other Purchased Services, but the School Corporation's supporting documentation did not include any items that would be classified as such. The ESSER III, Year 2 report, which covered the period of July 1, 2021 to June 30, 2022, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported the purchase of Chromebooks as Purchased Property Services, which was not the appropriate classification for the expenditure. The ESSER III, Year 3 report, which covered the period of July 1, 2022 to June 30, 2023, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported amounts related to Purchased Property Services and Personnel Services - Salaries that were not supported by the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 34 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not act upon its corrective action plan submitted in response to the same finding included in the prior audit and did not take further steps to ensure compliance. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, due to a lack of review and segregation of duties, the School Corporation submitted ESSER II and ESSER III reports that were not supported by the School Corporation's records. As a result, material noncompliance occurred and remained undetected. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 35 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls and strengthen its policies and procedures to ensure all reports submitted are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-008 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425C, 84.425D, 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425C200018, S425D210013, S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. INDIANA STATE BOARD OF ACCOUNTS 33 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and key line items such as "Number of Specific Positions Supported with ESSER Funds," "Allocation of ESSER funds . . . ," "LEA expenditures by ESSER Subgrant fund . . . ," and "Full-Time Equivalency Positions." As part of sound management of the federal award, the School Corporation was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The School Corporation had not properly designed or implemented such a system, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. During the audit period, the School Corporation submitted one ESSER I report, two ESSER II reports, two ESSER III reports, and one ARP HCY II Report, for a total of six reports. There was no evidence of an oversight, review, or approval process to prevent, or detect and correct, errors prior to submission. All six reports were selected for testing. Four of the reports were not supported by the School Corporation's records, and their accuracy and completeness could not be verified. The following errors were identified: The ESSER II, Year 2 and Year 3 reports, which covered the periods of July 1, 2021 to June 30, 2022, and July 1, 2022 to June 30, 2023, respectively, Key Line Items were not able to be traced to supporting documentation. For both reports, the supplies line item could not be traced to the School Corporation's records. For ESSER II, Year 3, the School Corporation reported Other Purchased Services, but the School Corporation's supporting documentation did not include any items that would be classified as such. The ESSER III, Year 2 report, which covered the period of July 1, 2021 to June 30, 2022, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported the purchase of Chromebooks as Purchased Property Services, which was not the appropriate classification for the expenditure. The ESSER III, Year 3 report, which covered the period of July 1, 2022 to June 30, 2023, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported amounts related to Purchased Property Services and Personnel Services - Salaries that were not supported by the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 34 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not act upon its corrective action plan submitted in response to the same finding included in the prior audit and did not take further steps to ensure compliance. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, due to a lack of review and segregation of duties, the School Corporation submitted ESSER II and ESSER III reports that were not supported by the School Corporation's records. As a result, material noncompliance occurred and remained undetected. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 35 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls and strengthen its policies and procedures to ensure all reports submitted are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-008 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425C, 84.425D, 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425C200018, S425D210013, S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. INDIANA STATE BOARD OF ACCOUNTS 33 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and key line items such as "Number of Specific Positions Supported with ESSER Funds," "Allocation of ESSER funds . . . ," "LEA expenditures by ESSER Subgrant fund . . . ," and "Full-Time Equivalency Positions." As part of sound management of the federal award, the School Corporation was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The School Corporation had not properly designed or implemented such a system, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. During the audit period, the School Corporation submitted one ESSER I report, two ESSER II reports, two ESSER III reports, and one ARP HCY II Report, for a total of six reports. There was no evidence of an oversight, review, or approval process to prevent, or detect and correct, errors prior to submission. All six reports were selected for testing. Four of the reports were not supported by the School Corporation's records, and their accuracy and completeness could not be verified. The following errors were identified: The ESSER II, Year 2 and Year 3 reports, which covered the periods of July 1, 2021 to June 30, 2022, and July 1, 2022 to June 30, 2023, respectively, Key Line Items were not able to be traced to supporting documentation. For both reports, the supplies line item could not be traced to the School Corporation's records. For ESSER II, Year 3, the School Corporation reported Other Purchased Services, but the School Corporation's supporting documentation did not include any items that would be classified as such. The ESSER III, Year 2 report, which covered the period of July 1, 2021 to June 30, 2022, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported the purchase of Chromebooks as Purchased Property Services, which was not the appropriate classification for the expenditure. The ESSER III, Year 3 report, which covered the period of July 1, 2022 to June 30, 2023, Key Line Items were not able to be traced to supporting documentation. The School Corporation reported amounts related to Purchased Property Services and Personnel Services - Salaries that were not supported by the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 34 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program. . . ." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not act upon its corrective action plan submitted in response to the same finding included in the prior audit and did not take further steps to ensure compliance. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, due to a lack of review and segregation of duties, the School Corporation submitted ESSER II and ESSER III reports that were not supported by the School Corporation's records. As a result, material noncompliance occurred and remained undetected. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 35 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls and strengthen its policies and procedures to ensure all reports submitted are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-009 Subject: COVID-19 - Education Stabilization Fund - Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425U Federal Award Number and Year (or Other Identifying Number): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Modified Opinion This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-005. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. INDIANA STATE BOARD OF ACCOUNTS 36 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities Construction contracts in excess of $2,000 financed by federal assistance funds must pay wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) to their laborers and mechanics. Nonfederal entities are to include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with these requirements and the DOL regulations. This would include a requirement to submit a copy of the payroll and statement of compliance to the entity for each week in which contract work was performed. The School Corporation did not have policies and procedures in place to ensure that contractors were paid prevailing wage rates for contracts in excess of $2,000 that were paid from federal grant funds. The one contract tested did not include the required prevailing wage rate clause, and the contractor did not submit the certified payrolls to the School Corporation. 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 awards 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). . . ." 29 CFR 5.5 states in part: "(a) The Agency head will cause or require the contracting officer to require the contracting officer to insert in full, or (for contracts covered by the Federal Acquisition Regulation (48 CFR chapter 1)) by reference, in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the laws referenced by § 5.1, the following clauses . . . (1) Minimum wages. INDIANA STATE BOARD OF ACCOUNTS 37 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) All laborers and mechanics employed or working upon the site of the work (or otherwise working in construction or development of the project under a development statute), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of basic hourly wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. . . . (3) Payrolls and basic records. . . . (ii) (A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals. . . ." 2 CFR 200 Appendix II states in part: "In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non- Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, 'Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction'). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, management of the School Corporation did not take steps to ensure compliance with the requirement, such as amending the contract and requesting future payroll certifications, after being made aware of noncompliance during the last audit engagement. INDIANA STATE BOARD OF ACCOUNTS 38 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Furthermore, not taking corrective action after the last audit led to additional noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a system of internal controls and include the wage rate requirement clause in construction contracts and obtain certified payrolls as required. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-009 Subject: COVID-19 - Education Stabilization Fund - Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425U Federal Award Number and Year (or Other Identifying Number): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Modified Opinion This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-005. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. INDIANA STATE BOARD OF ACCOUNTS 36 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities Construction contracts in excess of $2,000 financed by federal assistance funds must pay wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) to their laborers and mechanics. Nonfederal entities are to include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with these requirements and the DOL regulations. This would include a requirement to submit a copy of the payroll and statement of compliance to the entity for each week in which contract work was performed. The School Corporation did not have policies and procedures in place to ensure that contractors were paid prevailing wage rates for contracts in excess of $2,000 that were paid from federal grant funds. The one contract tested did not include the required prevailing wage rate clause, and the contractor did not submit the certified payrolls to the School Corporation. 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 awards 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). . . ." 29 CFR 5.5 states in part: "(a) The Agency head will cause or require the contracting officer to require the contracting officer to insert in full, or (for contracts covered by the Federal Acquisition Regulation (48 CFR chapter 1)) by reference, in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the laws referenced by § 5.1, the following clauses . . . (1) Minimum wages. INDIANA STATE BOARD OF ACCOUNTS 37 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) All laborers and mechanics employed or working upon the site of the work (or otherwise working in construction or development of the project under a development statute), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of basic hourly wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. . . . (3) Payrolls and basic records. . . . (ii) (A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals. . . ." 2 CFR 200 Appendix II states in part: "In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non- Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, 'Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction'). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, management of the School Corporation did not take steps to ensure compliance with the requirement, such as amending the contract and requesting future payroll certifications, after being made aware of noncompliance during the last audit engagement. INDIANA STATE BOARD OF ACCOUNTS 38 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Furthermore, not taking corrective action after the last audit led to additional noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a system of internal controls and include the wage rate requirement clause in construction contracts and obtain certified payrolls as required. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness 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 Eligibility compliance requirement. The Indiana Department of Education defines "Direct Certification" (DC) as follows: "(DC) is a method to automatically qualify students for free or reduced meals using data from Family and Social Services Administration (SNAP, TANF, and Medicaid) and Department of Child Services (Foster) and matching that with the Local Educational Agency's reported enrollment. Direct Certified households do not need to complete a meal application and will not be included in the verification process because their eligibility has already been verified." Internal controls had not been properly designed and implemented over students receiving free/reduced price meal benefits via DC. The Assistant Food Service Director generated the DC reports on the School Nutrition Program Indiana web portal and entered resulting eligibility determinations into the point-of-sale system (Harmony) without a documented oversight, review or approval in process in place to ensure their accuracy. The lack of internal controls over the DCs 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 School Corporation officials were unaware they should document a review of the DC process by someone other than the Assistant Food Service Director. Effect The lack of an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Eligibility compliance requirement. Verifying the accuracy of students directly certified for benefits in the point-of-sale system will ensure that ineligible students do not receive free or reduced-price meals. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management strengthen its system of internal controls to ensure that directly certified students eligible for meal benefits are verified for accuracy in Harmony by someone other than the Assistant Food Service Director. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 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 2022-003. 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 Procurement and Suspension and Debarment compliance requirement. Procurement 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 $150,000 per Indiana Code. 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 of $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases were followed. The School Corporation did not obtain price or rate quotes from multiple vendors for its audit period contract with Coca-Cola. Documentation detailing the history of procurement, including rationale to limit competition at the time of purchase was not provided for audit. Suspension and Debarment Nonfederal entities and contractors are subject to nonprocurement debarment and suspension regulations. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or are ineligible for participation in federal assistance programs or activities. This is done by checking SAM Exclusions, collecting a certification from that entity, or adding a clause or condition to the covered transaction with that entity. The School Corporation had not designed or implemented adequate policies or procedures to ensure that applicable vendors who received federal funds over certain thresholds were not suspended or debarred from participating in federal awards programs. There was one vendor (Coca-Cola) subject to suspension and debarment requirements during the audit period that was not procured through the School Corporation's affiliated Educational Services Center for cooperative purchasing. The School Corporation did not perform procedures to ensure the vendor was not suspended, debarred, or otherwise excluded from or eligible for participation in federal assistance programs or activities. The lack of internal controls was a systemic issue throughout the audit period. Noncompliance was isolated to one vendor (and related purchases) for both procurement and suspension and debarment requirements. 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(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: . . . (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. . . ." 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). . . . (b) A purchasing agent may purchase supplies under this section by inviting quotes from at least three (3) persons known to deal in the lines or classes of supplies to be purchased. (c) The purchasing agent shall mail an invitation to quote to the persons described in subsection (b) at least seven (7) days before the time fixed for receiving quotes. (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 the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The Superintendent of Schools indicated that alternative vendor(s) had left the local geographical area and no longer attempted to submit quotes or bids for services as it had done in prior years. Additionally, School Corporation officials were unaware of the requirement to verify that all vendors over $25,000 were not suspended or debarred from receiving federal grant funds. Effect The lack of an effective internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could enable small purchases made by the School Corporation to be uncompetitive and could lead to contracting with vendors who are suspended or debarred from receiving federal grant funding. Noncompliance with the grant agreement and the 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 the School Corporation's management strengthen its system of internal controls over small purchase requirements to ensure that an adequate number price or rate quotes are obtained before purchase. Additionally, we recommended that vendors with a single or aggregate transaction amounts over $25,000 per fiscal year are verified for suspension and debarment prior to entering into the transaction and/or contract. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness 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 Eligibility compliance requirement. The Indiana Department of Education defines "Direct Certification" (DC) as follows: "(DC) is a method to automatically qualify students for free or reduced meals using data from Family and Social Services Administration (SNAP, TANF, and Medicaid) and Department of Child Services (Foster) and matching that with the Local Educational Agency's reported enrollment. Direct Certified households do not need to complete a meal application and will not be included in the verification process because their eligibility has already been verified." Internal controls had not been properly designed and implemented over students receiving free/reduced price meal benefits via DC. The Assistant Food Service Director generated the DC reports on the School Nutrition Program Indiana web portal and entered resulting eligibility determinations into the point-of-sale system (Harmony) without a documented oversight, review or approval in process in place to ensure their accuracy. The lack of internal controls over the DCs 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 School Corporation officials were unaware they should document a review of the DC process by someone other than the Assistant Food Service Director. Effect The lack of an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Eligibility compliance requirement. Verifying the accuracy of students directly certified for benefits in the point-of-sale system will ensure that ineligible students do not receive free or reduced-price meals. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management strengthen its system of internal controls to ensure that directly certified students eligible for meal benefits are verified for accuracy in Harmony by someone other than the Assistant Food Service Director. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 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 2022-003. 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 Procurement and Suspension and Debarment compliance requirement. Procurement 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 $150,000 per Indiana Code. 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 of $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases were followed. The School Corporation did not obtain price or rate quotes from multiple vendors for its audit period contract with Coca-Cola. Documentation detailing the history of procurement, including rationale to limit competition at the time of purchase was not provided for audit. Suspension and Debarment Nonfederal entities and contractors are subject to nonprocurement debarment and suspension regulations. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or are ineligible for participation in federal assistance programs or activities. This is done by checking SAM Exclusions, collecting a certification from that entity, or adding a clause or condition to the covered transaction with that entity. The School Corporation had not designed or implemented adequate policies or procedures to ensure that applicable vendors who received federal funds over certain thresholds were not suspended or debarred from participating in federal awards programs. There was one vendor (Coca-Cola) subject to suspension and debarment requirements during the audit period that was not procured through the School Corporation's affiliated Educational Services Center for cooperative purchasing. The School Corporation did not perform procedures to ensure the vendor was not suspended, debarred, or otherwise excluded from or eligible for participation in federal assistance programs or activities. The lack of internal controls was a systemic issue throughout the audit period. Noncompliance was isolated to one vendor (and related purchases) for both procurement and suspension and debarment requirements. 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(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: . . . (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. . . ." 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). . . . (b) A purchasing agent may purchase supplies under this section by inviting quotes from at least three (3) persons known to deal in the lines or classes of supplies to be purchased. (c) The purchasing agent shall mail an invitation to quote to the persons described in subsection (b) at least seven (7) days before the time fixed for receiving quotes. (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 the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The Superintendent of Schools indicated that alternative vendor(s) had left the local geographical area and no longer attempted to submit quotes or bids for services as it had done in prior years. Additionally, School Corporation officials were unaware of the requirement to verify that all vendors over $25,000 were not suspended or debarred from receiving federal grant funds. Effect The lack of an effective internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could enable small purchases made by the School Corporation to be uncompetitive and could lead to contracting with vendors who are suspended or debarred from receiving federal grant funding. Noncompliance with the grant agreement and the 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 the School Corporation's management strengthen its system of internal controls over small purchase requirements to ensure that an adequate number price or rate quotes are obtained before purchase. Additionally, we recommended that vendors with a single or aggregate transaction amounts over $25,000 per fiscal year are verified for suspension and debarment prior to entering into the transaction and/or contract. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness 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 Eligibility compliance requirement. The Indiana Department of Education defines "Direct Certification" (DC) as follows: "(DC) is a method to automatically qualify students for free or reduced meals using data from Family and Social Services Administration (SNAP, TANF, and Medicaid) and Department of Child Services (Foster) and matching that with the Local Educational Agency's reported enrollment. Direct Certified households do not need to complete a meal application and will not be included in the verification process because their eligibility has already been verified." Internal controls had not been properly designed and implemented over students receiving free/reduced price meal benefits via DC. The Assistant Food Service Director generated the DC reports on the School Nutrition Program Indiana web portal and entered resulting eligibility determinations into the point-of-sale system (Harmony) without a documented oversight, review or approval in process in place to ensure their accuracy. The lack of internal controls over the DCs 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 School Corporation officials were unaware they should document a review of the DC process by someone other than the Assistant Food Service Director. Effect The lack of an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Eligibility compliance requirement. Verifying the accuracy of students directly certified for benefits in the point-of-sale system will ensure that ineligible students do not receive free or reduced-price meals. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management strengthen its system of internal controls to ensure that directly certified students eligible for meal benefits are verified for accuracy in Harmony by someone other than the Assistant Food Service Director. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 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 2022-003. 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 Procurement and Suspension and Debarment compliance requirement. Procurement 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 $150,000 per Indiana Code. 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 of $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases were followed. The School Corporation did not obtain price or rate quotes from multiple vendors for its audit period contract with Coca-Cola. Documentation detailing the history of procurement, including rationale to limit competition at the time of purchase was not provided for audit. Suspension and Debarment Nonfederal entities and contractors are subject to nonprocurement debarment and suspension regulations. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or are ineligible for participation in federal assistance programs or activities. This is done by checking SAM Exclusions, collecting a certification from that entity, or adding a clause or condition to the covered transaction with that entity. The School Corporation had not designed or implemented adequate policies or procedures to ensure that applicable vendors who received federal funds over certain thresholds were not suspended or debarred from participating in federal awards programs. There was one vendor (Coca-Cola) subject to suspension and debarment requirements during the audit period that was not procured through the School Corporation's affiliated Educational Services Center for cooperative purchasing. The School Corporation did not perform procedures to ensure the vendor was not suspended, debarred, or otherwise excluded from or eligible for participation in federal assistance programs or activities. The lack of internal controls was a systemic issue throughout the audit period. Noncompliance was isolated to one vendor (and related purchases) for both procurement and suspension and debarment requirements. 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(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: . . . (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. . . ." 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). . . . (b) A purchasing agent may purchase supplies under this section by inviting quotes from at least three (3) persons known to deal in the lines or classes of supplies to be purchased. (c) The purchasing agent shall mail an invitation to quote to the persons described in subsection (b) at least seven (7) days before the time fixed for receiving quotes. (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 the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The Superintendent of Schools indicated that alternative vendor(s) had left the local geographical area and no longer attempted to submit quotes or bids for services as it had done in prior years. Additionally, School Corporation officials were unaware of the requirement to verify that all vendors over $25,000 were not suspended or debarred from receiving federal grant funds. Effect The lack of an effective internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could enable small purchases made by the School Corporation to be uncompetitive and could lead to contracting with vendors who are suspended or debarred from receiving federal grant funding. Noncompliance with the grant agreement and the 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 the School Corporation's management strengthen its system of internal controls over small purchase requirements to ensure that an adequate number price or rate quotes are obtained before purchase. Additionally, we recommended that vendors with a single or aggregate transaction amounts over $25,000 per fiscal year are verified for suspension and debarment prior to entering into the transaction and/or contract. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness 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 Eligibility compliance requirement. The Indiana Department of Education defines "Direct Certification" (DC) as follows: "(DC) is a method to automatically qualify students for free or reduced meals using data from Family and Social Services Administration (SNAP, TANF, and Medicaid) and Department of Child Services (Foster) and matching that with the Local Educational Agency's reported enrollment. Direct Certified households do not need to complete a meal application and will not be included in the verification process because their eligibility has already been verified." Internal controls had not been properly designed and implemented over students receiving free/reduced price meal benefits via DC. The Assistant Food Service Director generated the DC reports on the School Nutrition Program Indiana web portal and entered resulting eligibility determinations into the point-of-sale system (Harmony) without a documented oversight, review or approval in process in place to ensure their accuracy. The lack of internal controls over the DCs 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 School Corporation officials were unaware they should document a review of the DC process by someone other than the Assistant Food Service Director. Effect The lack of an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Eligibility compliance requirement. Verifying the accuracy of students directly certified for benefits in the point-of-sale system will ensure that ineligible students do not receive free or reduced-price meals. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management strengthen its system of internal controls to ensure that directly certified students eligible for meal benefits are verified for accuracy in Harmony by someone other than the Assistant Food Service Director. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 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 2022-003. 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 Procurement and Suspension and Debarment compliance requirement. Procurement 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 $150,000 per Indiana Code. 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 of $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases were followed. The School Corporation did not obtain price or rate quotes from multiple vendors for its audit period contract with Coca-Cola. Documentation detailing the history of procurement, including rationale to limit competition at the time of purchase was not provided for audit. Suspension and Debarment Nonfederal entities and contractors are subject to nonprocurement debarment and suspension regulations. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or are ineligible for participation in federal assistance programs or activities. This is done by checking SAM Exclusions, collecting a certification from that entity, or adding a clause or condition to the covered transaction with that entity. The School Corporation had not designed or implemented adequate policies or procedures to ensure that applicable vendors who received federal funds over certain thresholds were not suspended or debarred from participating in federal awards programs. There was one vendor (Coca-Cola) subject to suspension and debarment requirements during the audit period that was not procured through the School Corporation's affiliated Educational Services Center for cooperative purchasing. The School Corporation did not perform procedures to ensure the vendor was not suspended, debarred, or otherwise excluded from or eligible for participation in federal assistance programs or activities. The lack of internal controls was a systemic issue throughout the audit period. Noncompliance was isolated to one vendor (and related purchases) for both procurement and suspension and debarment requirements. 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(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: . . . (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. . . ." 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). . . . (b) A purchasing agent may purchase supplies under this section by inviting quotes from at least three (3) persons known to deal in the lines or classes of supplies to be purchased. (c) The purchasing agent shall mail an invitation to quote to the persons described in subsection (b) at least seven (7) days before the time fixed for receiving quotes. (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 the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The Superintendent of Schools indicated that alternative vendor(s) had left the local geographical area and no longer attempted to submit quotes or bids for services as it had done in prior years. Additionally, School Corporation officials were unaware of the requirement to verify that all vendors over $25,000 were not suspended or debarred from receiving federal grant funds. Effect The lack of an effective internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could enable small purchases made by the School Corporation to be uncompetitive and could lead to contracting with vendors who are suspended or debarred from receiving federal grant funding. Noncompliance with the grant agreement and the 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 the School Corporation's management strengthen its system of internal controls over small purchase requirements to ensure that an adequate number price or rate quotes are obtained before purchase. Additionally, we recommended that vendors with a single or aggregate transaction amounts over $25,000 per fiscal year are verified for suspension and debarment prior to entering into the transaction and/or contract. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness 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 Eligibility compliance requirement. The Indiana Department of Education defines "Direct Certification" (DC) as follows: "(DC) is a method to automatically qualify students for free or reduced meals using data from Family and Social Services Administration (SNAP, TANF, and Medicaid) and Department of Child Services (Foster) and matching that with the Local Educational Agency's reported enrollment. Direct Certified households do not need to complete a meal application and will not be included in the verification process because their eligibility has already been verified." Internal controls had not been properly designed and implemented over students receiving free/reduced price meal benefits via DC. The Assistant Food Service Director generated the DC reports on the School Nutrition Program Indiana web portal and entered resulting eligibility determinations into the point-of-sale system (Harmony) without a documented oversight, review or approval in process in place to ensure their accuracy. The lack of internal controls over the DCs 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 School Corporation officials were unaware they should document a review of the DC process by someone other than the Assistant Food Service Director. Effect The lack of an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Eligibility compliance requirement. Verifying the accuracy of students directly certified for benefits in the point-of-sale system will ensure that ineligible students do not receive free or reduced-price meals. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management strengthen its system of internal controls to ensure that directly certified students eligible for meal benefits are verified for accuracy in Harmony by someone other than the Assistant Food Service Director. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 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 2022-003. 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 Procurement and Suspension and Debarment compliance requirement. Procurement 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 $150,000 per Indiana Code. 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 of $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases were followed. The School Corporation did not obtain price or rate quotes from multiple vendors for its audit period contract with Coca-Cola. Documentation detailing the history of procurement, including rationale to limit competition at the time of purchase was not provided for audit. Suspension and Debarment Nonfederal entities and contractors are subject to nonprocurement debarment and suspension regulations. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or are ineligible for participation in federal assistance programs or activities. This is done by checking SAM Exclusions, collecting a certification from that entity, or adding a clause or condition to the covered transaction with that entity. The School Corporation had not designed or implemented adequate policies or procedures to ensure that applicable vendors who received federal funds over certain thresholds were not suspended or debarred from participating in federal awards programs. There was one vendor (Coca-Cola) subject to suspension and debarment requirements during the audit period that was not procured through the School Corporation's affiliated Educational Services Center for cooperative purchasing. The School Corporation did not perform procedures to ensure the vendor was not suspended, debarred, or otherwise excluded from or eligible for participation in federal assistance programs or activities. The lack of internal controls was a systemic issue throughout the audit period. Noncompliance was isolated to one vendor (and related purchases) for both procurement and suspension and debarment requirements. 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(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: . . . (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. . . ." 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). . . . (b) A purchasing agent may purchase supplies under this section by inviting quotes from at least three (3) persons known to deal in the lines or classes of supplies to be purchased. (c) The purchasing agent shall mail an invitation to quote to the persons described in subsection (b) at least seven (7) days before the time fixed for receiving quotes. (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 the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The Superintendent of Schools indicated that alternative vendor(s) had left the local geographical area and no longer attempted to submit quotes or bids for services as it had done in prior years. Additionally, School Corporation officials were unaware of the requirement to verify that all vendors over $25,000 were not suspended or debarred from receiving federal grant funds. Effect The lack of an effective internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could enable small purchases made by the School Corporation to be uncompetitive and could lead to contracting with vendors who are suspended or debarred from receiving federal grant funding. Noncompliance with the grant agreement and the 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 the School Corporation's management strengthen its system of internal controls over small purchase requirements to ensure that an adequate number price or rate quotes are obtained before purchase. Additionally, we recommended that vendors with a single or aggregate transaction amounts over $25,000 per fiscal year are verified for suspension and debarment prior to entering into the transaction and/or contract. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness 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 Eligibility compliance requirement. The Indiana Department of Education defines "Direct Certification" (DC) as follows: "(DC) is a method to automatically qualify students for free or reduced meals using data from Family and Social Services Administration (SNAP, TANF, and Medicaid) and Department of Child Services (Foster) and matching that with the Local Educational Agency's reported enrollment. Direct Certified households do not need to complete a meal application and will not be included in the verification process because their eligibility has already been verified." Internal controls had not been properly designed and implemented over students receiving free/reduced price meal benefits via DC. The Assistant Food Service Director generated the DC reports on the School Nutrition Program Indiana web portal and entered resulting eligibility determinations into the point-of-sale system (Harmony) without a documented oversight, review or approval in process in place to ensure their accuracy. The lack of internal controls over the DCs 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 School Corporation officials were unaware they should document a review of the DC process by someone other than the Assistant Food Service Director. Effect The lack of an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Eligibility compliance requirement. Verifying the accuracy of students directly certified for benefits in the point-of-sale system will ensure that ineligible students do not receive free or reduced-price meals. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management strengthen its system of internal controls to ensure that directly certified students eligible for meal benefits are verified for accuracy in Harmony by someone other than the Assistant Food Service Director. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24 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 2022-003. 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 Procurement and Suspension and Debarment compliance requirement. Procurement 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 $150,000 per Indiana Code. 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 of $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases were followed. The School Corporation did not obtain price or rate quotes from multiple vendors for its audit period contract with Coca-Cola. Documentation detailing the history of procurement, including rationale to limit competition at the time of purchase was not provided for audit. Suspension and Debarment Nonfederal entities and contractors are subject to nonprocurement debarment and suspension regulations. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or are ineligible for participation in federal assistance programs or activities. This is done by checking SAM Exclusions, collecting a certification from that entity, or adding a clause or condition to the covered transaction with that entity. The School Corporation had not designed or implemented adequate policies or procedures to ensure that applicable vendors who received federal funds over certain thresholds were not suspended or debarred from participating in federal awards programs. There was one vendor (Coca-Cola) subject to suspension and debarment requirements during the audit period that was not procured through the School Corporation's affiliated Educational Services Center for cooperative purchasing. The School Corporation did not perform procedures to ensure the vendor was not suspended, debarred, or otherwise excluded from or eligible for participation in federal assistance programs or activities. The lack of internal controls was a systemic issue throughout the audit period. Noncompliance was isolated to one vendor (and related purchases) for both procurement and suspension and debarment requirements. 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(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: . . . (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. . . ." 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). . . . (b) A purchasing agent may purchase supplies under this section by inviting quotes from at least three (3) persons known to deal in the lines or classes of supplies to be purchased. (c) The purchasing agent shall mail an invitation to quote to the persons described in subsection (b) at least seven (7) days before the time fixed for receiving quotes. (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 the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The Superintendent of Schools indicated that alternative vendor(s) had left the local geographical area and no longer attempted to submit quotes or bids for services as it had done in prior years. Additionally, School Corporation officials were unaware of the requirement to verify that all vendors over $25,000 were not suspended or debarred from receiving federal grant funds. Effect The lack of an effective internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could enable small purchases made by the School Corporation to be uncompetitive and could lead to contracting with vendors who are suspended or debarred from receiving federal grant funding. Noncompliance with the grant agreement and the 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 the School Corporation's management strengthen its system of internal controls over small purchase requirements to ensure that an adequate number price or rate quotes are obtained before purchase. Additionally, we recommended that vendors with a single or aggregate transaction amounts over $25,000 per fiscal year are verified for suspension and debarment prior to entering into the transaction and/or contract. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Assistance Listing Number, Federal Agency, and Program Name - ALN 14.218, U.S. Department of Housing and Urban Development Community Development Block Grant Entitlement Grant Federal Award Identification Number and Year - B23MC260015 Pass through Entity - Not applicable Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303 (a), the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the 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). Condition - The community development manager’s payroll expenses charged to the grant were supported by time records, but these records were not reviewed or approved by another individual. Questioned Costs - Unknown Identification of How Questioned Costs Were Computed - Not applicable Context - Recipients of federal awards must have internal control procedures in place to ensure payroll expenses allocated to the grant are accurate. During our audit testing, we confirmed that the community development manager reviews all payroll expenses charged to the grant, but nobody reviews or approves the managers allocated payroll expenses. Cause and Effect - The City did not have a procedure in place to review the community development manager's allocated payroll expenses, which could cause improperly reported or ineligible grant expenses. Recommendation - We recommend that the City implement internal controls to ensure the community development manager's payroll allocation is reviewed and approved before they are charged to the grant. Views of Responsible Officials and Corrective Action Plan - The City agrees with the finding. The City will implement a secondary review and approval of time sheets submitted by the community development manager. The approval will be completed by the third party consultant or chief of staff.
Assistance Listing Number, Federal Agency, and Program Name - ALN 14.218, U.S. Department of Housing and Urban Development Community Development Block Grant Entitlement Grant Federal Award Identification Number and Year - B23MC260015 Pass through Entity - Not applicable Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303 (a), the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the 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). Condition - The community development manager’s payroll expenses charged to the grant were supported by time records, but these records were not reviewed or approved by another individual. Questioned Costs - Unknown Identification of How Questioned Costs Were Computed - Not applicable Context - Recipients of federal awards must have internal control procedures in place to ensure payroll expenses allocated to the grant are accurate. During our audit testing, we confirmed that the community development manager reviews all payroll expenses charged to the grant, but nobody reviews or approves the managers allocated payroll expenses. Cause and Effect - The City did not have a procedure in place to review the community development manager's allocated payroll expenses, which could cause improperly reported or ineligible grant expenses. Recommendation - We recommend that the City implement internal controls to ensure the community development manager's payroll allocation is reviewed and approved before they are charged to the grant. Views of Responsible Officials and Corrective Action Plan - The City agrees with the finding. The City will implement a secondary review and approval of time sheets submitted by the community development manager. The approval will be completed by the third party consultant or chief of staff.
Assistance Listing Number, Federal Agency, and Program Name - ALN 14.218, U.S. Department of Housing and Urban Development Community Development Block Grant Entitlement Grant Federal Award Identification Number and Year - B23MC260015 Pass through Entity - Not applicable Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303 (a), the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the 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). Condition - The community development manager’s payroll expenses charged to the grant were supported by time records, but these records were not reviewed or approved by another individual. Questioned Costs - Unknown Identification of How Questioned Costs Were Computed - Not applicable Context - Recipients of federal awards must have internal control procedures in place to ensure payroll expenses allocated to the grant are accurate. During our audit testing, we confirmed that the community development manager reviews all payroll expenses charged to the grant, but nobody reviews or approves the managers allocated payroll expenses. Cause and Effect - The City did not have a procedure in place to review the community development manager's allocated payroll expenses, which could cause improperly reported or ineligible grant expenses. Recommendation - We recommend that the City implement internal controls to ensure the community development manager's payroll allocation is reviewed and approved before they are charged to the grant. Views of Responsible Officials and Corrective Action Plan - The City agrees with the finding. The City will implement a secondary review and approval of time sheets submitted by the community development manager. The approval will be completed by the third party consultant or chief of staff.
Program/Cluster: CDBG – Entitlement/Special Purpose Grants Cluster Federal Financial Assistance Listing Number: 14.218 Federal Grantor: U.S. Department of Housing and Urban Development Award Year: 2023-24 Grant Award Number: B-23-MC-06-0533 Compliance Requirement: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Non-Compliance 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. Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Condition: As a result of our audit procedures, we noted that one (1) out of one (1) first tier sub-awards tested were not reported timely in the FFATA Subaward Reporting System (FSRS), totaling $40,000. Transactions Tested Subaward Not Reported Report Not Timely Subaward Amount Incorrect Subaward Missing Key Elements 1 - 1 - - Dollar Amount of Tested Transactions Subaward Not Reported Report Not Timely Subaward Amount Incorrect Subaward Missing Key Elements $40,000 - $40,000 - - Cause: The City did not have proper internal controls in place to ensure sub-award information was submitted in accordance with FFATA. Effect: The lack of adequate policies governing report preparation and submission resulted in FFATA special reports not being filed as required by the program. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: We tested one (1) out of one (1) first tier subawards greater than $30,000 awarded during the fiscal year. Repeat Finding from Prior Year(s): No. Recommendation: We recommend the City implement policies and procedures to ensure the requirement FFATA reports are prepared and submitted to the Federal Funding Accountability and Transparency Act Subaward Reporting System in a timely manner. Views of Responsible Officials: Management agrees. See separately issued corrective action plan.
Program/Cluster: CDBG – Entitlement/Special Purpose Grants Cluster Federal Financial Assistance Listing Number: 14.218 Federal Grantor: U.S. Department of Housing and Urban Development Award Year: 2023-24 Grant Award Number: B-23-MC-06-0533 Compliance Requirement: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Non-Compliance 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. Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Condition: As a result of our audit procedures, we noted that one (1) out of one (1) first tier sub-awards tested were not reported timely in the FFATA Subaward Reporting System (FSRS), totaling $40,000. Transactions Tested Subaward Not Reported Report Not Timely Subaward Amount Incorrect Subaward Missing Key Elements 1 - 1 - - Dollar Amount of Tested Transactions Subaward Not Reported Report Not Timely Subaward Amount Incorrect Subaward Missing Key Elements $40,000 - $40,000 - - Cause: The City did not have proper internal controls in place to ensure sub-award information was submitted in accordance with FFATA. Effect: The lack of adequate policies governing report preparation and submission resulted in FFATA special reports not being filed as required by the program. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: We tested one (1) out of one (1) first tier subawards greater than $30,000 awarded during the fiscal year. Repeat Finding from Prior Year(s): No. Recommendation: We recommend the City implement policies and procedures to ensure the requirement FFATA reports are prepared and submitted to the Federal Funding Accountability and Transparency Act Subaward Reporting System in a timely manner. Views of Responsible Officials: Management agrees. See separately issued corrective action plan.
Information on the federal program: Subject: Education Stabilization Fund (ESSER) – Internal Controls Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 Financial reporting . . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirements. Cause: The School Corporation's management implemented a review control over the annual data reports, however, it was not sufficient enough to detect and prevent errors in annual data reports submitted to the Indiana Department of Education. Effect: Annual data reports submitted during the audit period to the Indiana Department of Education contained material errors compared to underlying transaction detail for the period reported. Questioned Costs: There were no questioned costs identified. Context: The School Corporation was required to submit Annual Data Reports to the Indiana Department of Education (IDOE) during the audit period to meet federal reporting requirements for ESSER grant awards. We noted that the ESSER I amount reported on the Year 3 report ($86,004) did not agree to the underlying expenditure records ($196,436) for the period of July 1, 2021 through June 30, 2022. We also noted that the ESSER II and ESSER III amounts reported on the Year 3 report ($0 and $1,684,755, respectively) did not agree to the underlying expenditure records ($1,391,963 and $4,330,649, respectively), for the period of July 1, 2022 through June 30, 2023. Identification as a repeat finding: Yes. See Finding 2022-003 in the prior audit report. Recommendation: We recommend management review internal controls over the review of annual data reports to ensure the data to be submitted agrees to underlying transaction detail or other supporting documentation prior to the submission of the annual data report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Education Stabilization Fund (ESSER) – Internal Controls Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 Financial reporting . . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirements. Cause: The School Corporation's management implemented a review control over the annual data reports, however, it was not sufficient enough to detect and prevent errors in annual data reports submitted to the Indiana Department of Education. Effect: Annual data reports submitted during the audit period to the Indiana Department of Education contained material errors compared to underlying transaction detail for the period reported. Questioned Costs: There were no questioned costs identified. Context: The School Corporation was required to submit Annual Data Reports to the Indiana Department of Education (IDOE) during the audit period to meet federal reporting requirements for ESSER grant awards. We noted that the ESSER I amount reported on the Year 3 report ($86,004) did not agree to the underlying expenditure records ($196,436) for the period of July 1, 2021 through June 30, 2022. We also noted that the ESSER II and ESSER III amounts reported on the Year 3 report ($0 and $1,684,755, respectively) did not agree to the underlying expenditure records ($1,391,963 and $4,330,649, respectively), for the period of July 1, 2022 through June 30, 2023. Identification as a repeat finding: Yes. See Finding 2022-003 in the prior audit report. Recommendation: We recommend management review internal controls over the review of annual data reports to ensure the data to be submitted agrees to underlying transaction detail or other supporting documentation prior to the submission of the annual data report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Education Stabilization Fund (ESSER) – Internal Controls Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 Financial reporting . . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirements. Cause: The School Corporation's management implemented a review control over the annual data reports, however, it was not sufficient enough to detect and prevent errors in annual data reports submitted to the Indiana Department of Education. Effect: Annual data reports submitted during the audit period to the Indiana Department of Education contained material errors compared to underlying transaction detail for the period reported. Questioned Costs: There were no questioned costs identified. Context: The School Corporation was required to submit Annual Data Reports to the Indiana Department of Education (IDOE) during the audit period to meet federal reporting requirements for ESSER grant awards. We noted that the ESSER I amount reported on the Year 3 report ($86,004) did not agree to the underlying expenditure records ($196,436) for the period of July 1, 2021 through June 30, 2022. We also noted that the ESSER II and ESSER III amounts reported on the Year 3 report ($0 and $1,684,755, respectively) did not agree to the underlying expenditure records ($1,391,963 and $4,330,649, respectively), for the period of July 1, 2022 through June 30, 2023. Identification as a repeat finding: Yes. See Finding 2022-003 in the prior audit report. Recommendation: We recommend management review internal controls over the review of annual data reports to ensure the data to be submitted agrees to underlying transaction detail or other supporting documentation prior to the submission of the annual data report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Education Stabilization Fund (ESSER) – Internal Controls Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 Financial reporting . . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirements. Cause: The School Corporation's management implemented a review control over the annual data reports, however, it was not sufficient enough to detect and prevent errors in annual data reports submitted to the Indiana Department of Education. Effect: Annual data reports submitted during the audit period to the Indiana Department of Education contained material errors compared to underlying transaction detail for the period reported. Questioned Costs: There were no questioned costs identified. Context: The School Corporation was required to submit Annual Data Reports to the Indiana Department of Education (IDOE) during the audit period to meet federal reporting requirements for ESSER grant awards. We noted that the ESSER I amount reported on the Year 3 report ($86,004) did not agree to the underlying expenditure records ($196,436) for the period of July 1, 2021 through June 30, 2022. We also noted that the ESSER II and ESSER III amounts reported on the Year 3 report ($0 and $1,684,755, respectively) did not agree to the underlying expenditure records ($1,391,963 and $4,330,649, respectively), for the period of July 1, 2022 through June 30, 2023. Identification as a repeat finding: Yes. See Finding 2022-003 in the prior audit report. Recommendation: We recommend management review internal controls over the review of annual data reports to ensure the data to be submitted agrees to underlying transaction detail or other supporting documentation prior to the submission of the annual data report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Material Noncompliance, Qualified Opinion Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). 29 CFR 5.5 states in part: (1) Minimum wages. (i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics… (3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). 2 CFR 200 Appendix II states in part: In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay w ages not less than once a week.. . .” Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation had projects for construction of new facilities including an early learning center and improvements to sports facilities which was funded with ESSER II (84.425D) and ESSER III (84.425U) grant awards. In our sample of three vendors, the School Corporation did not include Davis- Bacon wage rate requirements in the vendor contract, and therefore the vendor did not include the verbiage within their subcontractor agreements. Also, the School Corporation did not obtain the weekly payroll reports certifications from the construction vendor to monitor compliance with Davis-Bacon wage rate requirements. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements during the audit period. The total project costs disbursed during the audit period in our sample was $3,681,455 which includes material and labor costs. Identification as a repeat finding: Yes. See Finding 2022-002 in the prior audit report. Recommendation: We recommend the School Corporation include a wage rate requirement clause in all contracts requiring labor installation which are funded with federal grants. We also recommend the School Corporation implement a formal process to ensure the required weekly payroll reports certifications are collected and reviewed for projects requiring labor installation and funded by federal grants subject to Davis- Bacon wage rate requirements to ensure compliance with federal regulations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Material Noncompliance, Qualified Opinion Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). 29 CFR 5.5 states in part: (1) Minimum wages. (i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics… (3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). 2 CFR 200 Appendix II states in part: In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay w ages not less than once a week.. . .” Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation had projects for construction of new facilities including an early learning center and improvements to sports facilities which was funded with ESSER II (84.425D) and ESSER III (84.425U) grant awards. In our sample of three vendors, the School Corporation did not include Davis- Bacon wage rate requirements in the vendor contract, and therefore the vendor did not include the verbiage within their subcontractor agreements. Also, the School Corporation did not obtain the weekly payroll reports certifications from the construction vendor to monitor compliance with Davis-Bacon wage rate requirements. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements during the audit period. The total project costs disbursed during the audit period in our sample was $3,681,455 which includes material and labor costs. Identification as a repeat finding: Yes. See Finding 2022-002 in the prior audit report. Recommendation: We recommend the School Corporation include a wage rate requirement clause in all contracts requiring labor installation which are funded with federal grants. We also recommend the School Corporation implement a formal process to ensure the required weekly payroll reports certifications are collected and reviewed for projects requiring labor installation and funded by federal grants subject to Davis- Bacon wage rate requirements to ensure compliance with federal regulations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Material Noncompliance, Qualified Opinion Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). 29 CFR 5.5 states in part: (1) Minimum wages. (i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics… (3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). 2 CFR 200 Appendix II states in part: In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay w ages not less than once a week.. . .” Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation had projects for construction of new facilities including an early learning center and improvements to sports facilities which was funded with ESSER II (84.425D) and ESSER III (84.425U) grant awards. In our sample of three vendors, the School Corporation did not include Davis- Bacon wage rate requirements in the vendor contract, and therefore the vendor did not include the verbiage within their subcontractor agreements. Also, the School Corporation did not obtain the weekly payroll reports certifications from the construction vendor to monitor compliance with Davis-Bacon wage rate requirements. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements during the audit period. The total project costs disbursed during the audit period in our sample was $3,681,455 which includes material and labor costs. Identification as a repeat finding: Yes. See Finding 2022-002 in the prior audit report. Recommendation: We recommend the School Corporation include a wage rate requirement clause in all contracts requiring labor installation which are funded with federal grants. We also recommend the School Corporation implement a formal process to ensure the required weekly payroll reports certifications are collected and reviewed for projects requiring labor installation and funded by federal grants subject to Davis- Bacon wage rate requirements to ensure compliance with federal regulations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Criteria and Condition: According to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), section 200.403, establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with State and local governments. To be allowable, under federal awards, costs must meet certain criteria: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian tribes only, as otherwise provided for in this part. f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g) Be adequately documented. h) Cost must be incurred during the approved budget period. Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards 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 terms and conditions of the Federal award. For five of the forty disbursement samples selected, PEBC was unable to provide adequate documentation for the selected items. Two of the samples were noted by management to have been improperly coded to the federal grant. As a result, the auditor was unable to determine the allowability of these sample selections under the Coronavirus State and Local Fiscal Recovery Funds grant related to the student educator test stipend program. Further, the auditor was unable to determine whether costs were incurred during the approved budget period. Cause: The condition was caused by a lack of internal controls over Coronavirus State and Local Fiscal Recovery Funds claims for student educator test stipend expenditures. Effect: When adequate support is not obtained and used to support the amount charged to the federal program or supported by an after-the-fact review, there is a risk that unsupported or inaccurate costs are being charged to the federal program. Context: During testing procedures over Coronavirus State and Local Fiscal Recovery Funds disbursements for the activities allowed or unallowed compliance requirement, the auditor was unable to obtain source documents from management for five of the forty samples. Identification of Repeat Findings: This is not a repeat finding. Recommendation: Proper control activities should be implemented to allow for a consistent, accurate, and allowable method to support distribution of expenditures to federal programs, which could include a consistent multi-stage review process for expenditures that are to be allocated to the Coronavirus State and Local Fiscal Recovery Funds grant. Further, management should clearly organize and retain records to support approved amounts being listed as expenditures on their SEFA.
Information on the federal program: Subject: Special Education Cluster – Internal Controls Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listing Number: 84.027, 84.027X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-123-PN01, 23611-0123-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement Audit Finding: Material Weakness Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must 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 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." 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." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the Special Education Cluster and Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension compliance requirement. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For the three small purchase method procurements sampled for testing, we noted that the School Corporation, did not obtain quotes from an adequate number of qualified sources. The total amount disbursed for the sample items was $114,123 in FY23 and $13,404 in FY24 for contracted rehabilitation therapy and speech pathology services. The School Corporation did properly perform a suspension and debarment checks on the sample vendors. Identification as a repeat finding: No. Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that the School Corporation’s procurement policy is adhered to and quotes are obtained from an adequate number of qualified sources as required for small purchase method procurements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Special Education Cluster – Internal Controls Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listing Number: 84.027, 84.027X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-123-PN01, 23611-0123-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement Audit Finding: Material Weakness Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must 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 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." 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." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the Special Education Cluster and Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension compliance requirement. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For the three small purchase method procurements sampled for testing, we noted that the School Corporation, did not obtain quotes from an adequate number of qualified sources. The total amount disbursed for the sample items was $114,123 in FY23 and $13,404 in FY24 for contracted rehabilitation therapy and speech pathology services. The School Corporation did properly perform a suspension and debarment checks on the sample vendors. Identification as a repeat finding: No. Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that the School Corporation’s procurement policy is adhered to and quotes are obtained from an adequate number of qualified sources as required for small purchase method procurements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listing Number: 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Material Noncompliance, Qualified Opinion Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). . . ." 29 CFR 5.5 states in part: (1) Minimum wages. (i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics… (3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). 2 CFR 200 Appendix II states in part: In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week.. . .” Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: For the three projects sampled for Davis-Bacon requirements, the School Corporation did not obtain the weekly payroll reports certifications from the companies that performed renovations on the School Corporation. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements. Additionally, the School Corporation did not have contracts with the companies that included the clause for the federal wage rate requirements. The total amount disbursed and reported on the SEFA during the audit period is $648,235 and the labor portion was not determinable by the School Corporation. Identification as a repeat finding: This is a repeat finding from the immediately prior audit. The prior finding number was 2022-002. Recommendation: We recommend the School Corporation implement a formal process to ensure the required weekly payroll reports certifications are collected and reviewed to ensure compliance with the wage rate requirements. Additionally, We recommend the School Corporation implement a formal process to ensure the contracts including labor costs over $2,000 funded by federal awards have Davis Bacon wage rate requirement clause in written contract. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Federal Agencies: US Department of Defense (DoD); US Department of Energy (DOE); US Health and Human Services (HHS) Program Names: Research & Development Cluster: Basic, Applied and Advanced Research in Science and Engineering; Fossil Energy Research and Development; COVID19 – Discovery and Applied Research for Technological Innovations to Improve Human Health; Research and Technology Development; Office of Science and Financial Assistance Program; Air Force Defense Research Sciences Program; Cardiovascular Diseases Research; Health Center Program Cluster: Community Health Centers; and AIDS Education and Training Centers ALN #s: 12.630; 81.089; 93.286; 12.910; 81.049; 12.800; 93.837; 93.224; and 93.145 Award Numbers: ARMY W911NF-17-2-0196; DOE DE-FE0031581; DOE DE-FE0032049; NIH 1 R21 EB031310A; DARPA HR011-23-2-0004; DOE DE-SC0018420; AF FA9550-23-1-0609; SNAP 5R01HL152692-04; HRSA 5 U1OHA29293-09-03; and HRSA 5 U1OHA32109-07 Federal Award Year 2023 – 2024 Questioned Costs: None 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments The University of Illinois Urbana-Champaign and the University of Illinois Chicago did not make certain subrecipient payments timely and the controls in place did not identify the late payments. Condition: Out of thirty-two subrecipient payments tested which were made by the University of Illinois at Urbana-Champaign under the Research & Development Cluster, twelve payments (38%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 35-201 days after receipt of the billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. Out of eight subrecipient payments tested which were made by the University of Illinois Chicago under the Research & Development Cluster, one payment (13%) was not submitted within 30 days after receipt of the billing from the subrecipient. The payment was 32 days after the receipt of billing from the subrecipient. The sample was not intended to be, and was not, a statistically valid sample. Out of eighteen subrecipient payments tested which were made by the University of Illinois Chicago under the Health Center Program Cluster: Community Health Centers and AIDS Education and Training Centers, five payments (28%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 42-120 days after the receipt of billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments (Continued) Criteria: Under Uniform Guidance (2 CFR 200.305(b)(3)), when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls deigned to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure subrecipient payments are made timely. Cause: University of Illinois Urbana-Champaign officials stated the multi-layered review and approval process along with staffing deficiencies and workload challenges caused the situations for the exceptions noted. University of Illinois Chicago officials stated the one payment was paid 32 days from receipt of the invoice due to high volumes of invoice processing at fiscal year end and the payment due date coinciding with a holiday. The five other subrecipient payments were due to high staff workloads and occurred prior to the fiscal year 2023 corrective action implementation. Effect: Without proper program cash management processes and procedures, late subrecipient payments could result in the loss of future funding. (Finding Code No. 2024-002; 2023-006; 2022-008) Recommendation: We recommend the University of Illinois Urbana-Champaign and the University of Illinois Chicago review current processes, policies and procedures to minimize the time elapsing between the transfer of federal funds to the subrecipient. University Response: Accepted. The University will take steps to address the recommendation in this finding.
Federal Agencies: US Department of Defense (DoD); US Department of Energy (DOE); US Health and Human Services (HHS) Program Names: Research & Development Cluster: Basic, Applied and Advanced Research in Science and Engineering; Fossil Energy Research and Development; COVID19 – Discovery and Applied Research for Technological Innovations to Improve Human Health; Research and Technology Development; Office of Science and Financial Assistance Program; Air Force Defense Research Sciences Program; Cardiovascular Diseases Research; Health Center Program Cluster: Community Health Centers; and AIDS Education and Training Centers ALN #s: 12.630; 81.089; 93.286; 12.910; 81.049; 12.800; 93.837; 93.224; and 93.145 Award Numbers: ARMY W911NF-17-2-0196; DOE DE-FE0031581; DOE DE-FE0032049; NIH 1 R21 EB031310A; DARPA HR011-23-2-0004; DOE DE-SC0018420; AF FA9550-23-1-0609; SNAP 5R01HL152692-04; HRSA 5 U1OHA29293-09-03; and HRSA 5 U1OHA32109-07 Federal Award Year 2023 – 2024 Questioned Costs: None 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments The University of Illinois Urbana-Champaign and the University of Illinois Chicago did not make certain subrecipient payments timely and the controls in place did not identify the late payments. Condition: Out of thirty-two subrecipient payments tested which were made by the University of Illinois at Urbana-Champaign under the Research & Development Cluster, twelve payments (38%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 35-201 days after receipt of the billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. Out of eight subrecipient payments tested which were made by the University of Illinois Chicago under the Research & Development Cluster, one payment (13%) was not submitted within 30 days after receipt of the billing from the subrecipient. The payment was 32 days after the receipt of billing from the subrecipient. The sample was not intended to be, and was not, a statistically valid sample. Out of eighteen subrecipient payments tested which were made by the University of Illinois Chicago under the Health Center Program Cluster: Community Health Centers and AIDS Education and Training Centers, five payments (28%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 42-120 days after the receipt of billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments (Continued) Criteria: Under Uniform Guidance (2 CFR 200.305(b)(3)), when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls deigned to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure subrecipient payments are made timely. Cause: University of Illinois Urbana-Champaign officials stated the multi-layered review and approval process along with staffing deficiencies and workload challenges caused the situations for the exceptions noted. University of Illinois Chicago officials stated the one payment was paid 32 days from receipt of the invoice due to high volumes of invoice processing at fiscal year end and the payment due date coinciding with a holiday. The five other subrecipient payments were due to high staff workloads and occurred prior to the fiscal year 2023 corrective action implementation. Effect: Without proper program cash management processes and procedures, late subrecipient payments could result in the loss of future funding. (Finding Code No. 2024-002; 2023-006; 2022-008) Recommendation: We recommend the University of Illinois Urbana-Champaign and the University of Illinois Chicago review current processes, policies and procedures to minimize the time elapsing between the transfer of federal funds to the subrecipient. University Response: Accepted. The University will take steps to address the recommendation in this finding.
Federal Agencies: US Department of Defense (DoD); US Department of Energy (DOE); US Health and Human Services (HHS) Program Names: Research & Development Cluster: Basic, Applied and Advanced Research in Science and Engineering; Fossil Energy Research and Development; COVID19 – Discovery and Applied Research for Technological Innovations to Improve Human Health; Research and Technology Development; Office of Science and Financial Assistance Program; Air Force Defense Research Sciences Program; Cardiovascular Diseases Research; Health Center Program Cluster: Community Health Centers; and AIDS Education and Training Centers ALN #s: 12.630; 81.089; 93.286; 12.910; 81.049; 12.800; 93.837; 93.224; and 93.145 Award Numbers: ARMY W911NF-17-2-0196; DOE DE-FE0031581; DOE DE-FE0032049; NIH 1 R21 EB031310A; DARPA HR011-23-2-0004; DOE DE-SC0018420; AF FA9550-23-1-0609; SNAP 5R01HL152692-04; HRSA 5 U1OHA29293-09-03; and HRSA 5 U1OHA32109-07 Federal Award Year 2023 – 2024 Questioned Costs: None 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments The University of Illinois Urbana-Champaign and the University of Illinois Chicago did not make certain subrecipient payments timely and the controls in place did not identify the late payments. Condition: Out of thirty-two subrecipient payments tested which were made by the University of Illinois at Urbana-Champaign under the Research & Development Cluster, twelve payments (38%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 35-201 days after receipt of the billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. Out of eight subrecipient payments tested which were made by the University of Illinois Chicago under the Research & Development Cluster, one payment (13%) was not submitted within 30 days after receipt of the billing from the subrecipient. The payment was 32 days after the receipt of billing from the subrecipient. The sample was not intended to be, and was not, a statistically valid sample. Out of eighteen subrecipient payments tested which were made by the University of Illinois Chicago under the Health Center Program Cluster: Community Health Centers and AIDS Education and Training Centers, five payments (28%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 42-120 days after the receipt of billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments (Continued) Criteria: Under Uniform Guidance (2 CFR 200.305(b)(3)), when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls deigned to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure subrecipient payments are made timely. Cause: University of Illinois Urbana-Champaign officials stated the multi-layered review and approval process along with staffing deficiencies and workload challenges caused the situations for the exceptions noted. University of Illinois Chicago officials stated the one payment was paid 32 days from receipt of the invoice due to high volumes of invoice processing at fiscal year end and the payment due date coinciding with a holiday. The five other subrecipient payments were due to high staff workloads and occurred prior to the fiscal year 2023 corrective action implementation. Effect: Without proper program cash management processes and procedures, late subrecipient payments could result in the loss of future funding. (Finding Code No. 2024-002; 2023-006; 2022-008) Recommendation: We recommend the University of Illinois Urbana-Champaign and the University of Illinois Chicago review current processes, policies and procedures to minimize the time elapsing between the transfer of federal funds to the subrecipient. University Response: Accepted. The University will take steps to address the recommendation in this finding.
Federal Agencies: US Department of Defense (DoD); US Department of Energy (DOE); US Health and Human Services (HHS) Program Names: Research & Development Cluster: Basic, Applied and Advanced Research in Science and Engineering; Fossil Energy Research and Development; COVID19 – Discovery and Applied Research for Technological Innovations to Improve Human Health; Research and Technology Development; Office of Science and Financial Assistance Program; Air Force Defense Research Sciences Program; Cardiovascular Diseases Research; Health Center Program Cluster: Community Health Centers; and AIDS Education and Training Centers ALN #s: 12.630; 81.089; 93.286; 12.910; 81.049; 12.800; 93.837; 93.224; and 93.145 Award Numbers: ARMY W911NF-17-2-0196; DOE DE-FE0031581; DOE DE-FE0032049; NIH 1 R21 EB031310A; DARPA HR011-23-2-0004; DOE DE-SC0018420; AF FA9550-23-1-0609; SNAP 5R01HL152692-04; HRSA 5 U1OHA29293-09-03; and HRSA 5 U1OHA32109-07 Federal Award Year 2023 – 2024 Questioned Costs: None 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments The University of Illinois Urbana-Champaign and the University of Illinois Chicago did not make certain subrecipient payments timely and the controls in place did not identify the late payments. Condition: Out of thirty-two subrecipient payments tested which were made by the University of Illinois at Urbana-Champaign under the Research & Development Cluster, twelve payments (38%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 35-201 days after receipt of the billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. Out of eight subrecipient payments tested which were made by the University of Illinois Chicago under the Research & Development Cluster, one payment (13%) was not submitted within 30 days after receipt of the billing from the subrecipient. The payment was 32 days after the receipt of billing from the subrecipient. The sample was not intended to be, and was not, a statistically valid sample. Out of eighteen subrecipient payments tested which were made by the University of Illinois Chicago under the Health Center Program Cluster: Community Health Centers and AIDS Education and Training Centers, five payments (28%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 42-120 days after the receipt of billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments (Continued) Criteria: Under Uniform Guidance (2 CFR 200.305(b)(3)), when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls deigned to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure subrecipient payments are made timely. Cause: University of Illinois Urbana-Champaign officials stated the multi-layered review and approval process along with staffing deficiencies and workload challenges caused the situations for the exceptions noted. University of Illinois Chicago officials stated the one payment was paid 32 days from receipt of the invoice due to high volumes of invoice processing at fiscal year end and the payment due date coinciding with a holiday. The five other subrecipient payments were due to high staff workloads and occurred prior to the fiscal year 2023 corrective action implementation. Effect: Without proper program cash management processes and procedures, late subrecipient payments could result in the loss of future funding. (Finding Code No. 2024-002; 2023-006; 2022-008) Recommendation: We recommend the University of Illinois Urbana-Champaign and the University of Illinois Chicago review current processes, policies and procedures to minimize the time elapsing between the transfer of federal funds to the subrecipient. University Response: Accepted. The University will take steps to address the recommendation in this finding.
Federal Agency: US Department of Education (ED) Program Name: Student Financial Assistance Cluster: Federal Direct Student Loans ALN #: 84.268 Award Numbers: N/A; Federal Award Year 2023 - 2024 Questioned Costs: None 2024-003. Finding: Errors in Reporting for NSLDS The University of Illinois Chicago did not properly report an enrollment change for a student who received federal student aid to the National Student Loan Data System (NSLDS) and the internal controls in place did not identify the error. Condition: Out of the twenty-five students tested at the University of Illinois Chicago, we noted one (4%) student in which the University did not report the correct enrollment effective date to the NSLDS at the Program-Level. The sample was not intended to be, and was not, a statistically valid sample. Criteria: The Code of Federal Regulations (34 CFR 685.309) requires enrollment status changes for students be reported to NSLDS within 30 days or within 60 days if the student with the status change will be reported on a scheduled transmission within 60 days of the change in status. Regulations require the status include an accurate effective date. According to the NSLDS Enrollment Reporting Guide, a student’s Program-Level enrollment status should be reported with the same enrollment status as student’s Campus-Level enrollment status for all programs the student is enrolled in at a location, even if the student is not currently taking coursework which applies to a particular program. If the student has withdrawn or graduated from an academic program, a “terminal enrollment status” of ‘W’ or ‘G,’ as appropriate, should be reported for the program, even if the student is still taking coursework applicable to other programs in which the student is enrolled. 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. Effective internal controls should include procedures to ensure enrollment reporting is completed properly. Cause: University officials stated despite a defect resolution implemented in June 2023, an issue remains unresolved with the NSLDS reporting process. Further targeted investigation into the NSLDS reporting process is ongoing. 2024-003. Finding: Errors in Reporting for NSLDS (Continued) Effect: If the NSLDS system is not updated with the student information, overawards could occur should the student transfer to another institution and the student may not properly enter the repayment period. (Finding Code No. 2024-003; 2023-007; 2022-006; 2021-010; 2020-006) Recommendation: We recommend the University of Illinois Chicago review current processes for reporting to NSLDS and implement procedures to ensure submissions are reported timely and accurately. University Response: Accepted. The University will take steps to address the recommendation in this finding.
Federal Agencies: US Department of Defense (DoD); US Department of Energy (DOE); US Health and Human Services (HHS) Program Names: Research & Development Cluster: Basic, Applied and Advanced Research in Science and Engineering; Fossil Energy Research and Development; COVID19 – Discovery and Applied Research for Technological Innovations to Improve Human Health; Research and Technology Development; Office of Science and Financial Assistance Program; Air Force Defense Research Sciences Program; Cardiovascular Diseases Research; Health Center Program Cluster: Community Health Centers; and AIDS Education and Training Centers ALN #s: 12.630; 81.089; 93.286; 12.910; 81.049; 12.800; 93.837; 93.224; and 93.145 Award Numbers: ARMY W911NF-17-2-0196; DOE DE-FE0031581; DOE DE-FE0032049; NIH 1 R21 EB031310A; DARPA HR011-23-2-0004; DOE DE-SC0018420; AF FA9550-23-1-0609; SNAP 5R01HL152692-04; HRSA 5 U1OHA29293-09-03; and HRSA 5 U1OHA32109-07 Federal Award Year 2023 – 2024 Questioned Costs: None 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments The University of Illinois Urbana-Champaign and the University of Illinois Chicago did not make certain subrecipient payments timely and the controls in place did not identify the late payments. Condition: Out of thirty-two subrecipient payments tested which were made by the University of Illinois at Urbana-Champaign under the Research & Development Cluster, twelve payments (38%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 35-201 days after receipt of the billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. Out of eight subrecipient payments tested which were made by the University of Illinois Chicago under the Research & Development Cluster, one payment (13%) was not submitted within 30 days after receipt of the billing from the subrecipient. The payment was 32 days after the receipt of billing from the subrecipient. The sample was not intended to be, and was not, a statistically valid sample. Out of eighteen subrecipient payments tested which were made by the University of Illinois Chicago under the Health Center Program Cluster: Community Health Centers and AIDS Education and Training Centers, five payments (28%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 42-120 days after the receipt of billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments (Continued) Criteria: Under Uniform Guidance (2 CFR 200.305(b)(3)), when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls deigned to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure subrecipient payments are made timely. Cause: University of Illinois Urbana-Champaign officials stated the multi-layered review and approval process along with staffing deficiencies and workload challenges caused the situations for the exceptions noted. University of Illinois Chicago officials stated the one payment was paid 32 days from receipt of the invoice due to high volumes of invoice processing at fiscal year end and the payment due date coinciding with a holiday. The five other subrecipient payments were due to high staff workloads and occurred prior to the fiscal year 2023 corrective action implementation. Effect: Without proper program cash management processes and procedures, late subrecipient payments could result in the loss of future funding. (Finding Code No. 2024-002; 2023-006; 2022-008) Recommendation: We recommend the University of Illinois Urbana-Champaign and the University of Illinois Chicago review current processes, policies and procedures to minimize the time elapsing between the transfer of federal funds to the subrecipient. University Response: Accepted. The University will take steps to address the recommendation in this finding.
Federal Agencies: US Department of Defense (DoD); US Department of Energy (DOE); US Health and Human Services (HHS) Program Names: Research & Development Cluster: Basic, Applied and Advanced Research in Science and Engineering; Fossil Energy Research and Development; COVID19 – Discovery and Applied Research for Technological Innovations to Improve Human Health; Research and Technology Development; Office of Science and Financial Assistance Program; Air Force Defense Research Sciences Program; Cardiovascular Diseases Research; Health Center Program Cluster: Community Health Centers; and AIDS Education and Training Centers ALN #s: 12.630; 81.089; 93.286; 12.910; 81.049; 12.800; 93.837; 93.224; and 93.145 Award Numbers: ARMY W911NF-17-2-0196; DOE DE-FE0031581; DOE DE-FE0032049; NIH 1 R21 EB031310A; DARPA HR011-23-2-0004; DOE DE-SC0018420; AF FA9550-23-1-0609; SNAP 5R01HL152692-04; HRSA 5 U1OHA29293-09-03; and HRSA 5 U1OHA32109-07 Federal Award Year 2023 – 2024 Questioned Costs: None 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments The University of Illinois Urbana-Champaign and the University of Illinois Chicago did not make certain subrecipient payments timely and the controls in place did not identify the late payments. Condition: Out of thirty-two subrecipient payments tested which were made by the University of Illinois at Urbana-Champaign under the Research & Development Cluster, twelve payments (38%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 35-201 days after receipt of the billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. Out of eight subrecipient payments tested which were made by the University of Illinois Chicago under the Research & Development Cluster, one payment (13%) was not submitted within 30 days after receipt of the billing from the subrecipient. The payment was 32 days after the receipt of billing from the subrecipient. The sample was not intended to be, and was not, a statistically valid sample. Out of eighteen subrecipient payments tested which were made by the University of Illinois Chicago under the Health Center Program Cluster: Community Health Centers and AIDS Education and Training Centers, five payments (28%) were not submitted within 30 days after receipt of the billing from the subrecipient. The payments ranged from 42-120 days after the receipt of billing from the subrecipients. The sample was not intended to be, and was not, a statistically valid sample. 2024-002. Finding: Cash Management – Timeliness of Subrecipient Payments (Continued) Criteria: Under Uniform Guidance (2 CFR 200.305(b)(3)), when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls deigned to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure subrecipient payments are made timely. Cause: University of Illinois Urbana-Champaign officials stated the multi-layered review and approval process along with staffing deficiencies and workload challenges caused the situations for the exceptions noted. University of Illinois Chicago officials stated the one payment was paid 32 days from receipt of the invoice due to high volumes of invoice processing at fiscal year end and the payment due date coinciding with a holiday. The five other subrecipient payments were due to high staff workloads and occurred prior to the fiscal year 2023 corrective action implementation. Effect: Without proper program cash management processes and procedures, late subrecipient payments could result in the loss of future funding. (Finding Code No. 2024-002; 2023-006; 2022-008) Recommendation: We recommend the University of Illinois Urbana-Champaign and the University of Illinois Chicago review current processes, policies and procedures to minimize the time elapsing between the transfer of federal funds to the subrecipient. University Response: Accepted. The University will take steps to address the recommendation in this finding.
Federal Agencies: US Department of Agriculture (USDA), US Department of Energy (DOE), US Health & Human Services (HHS) Program Names: Research & Development Cluster: Agriculture and Food Research Initiative (AFRI); Office of Science Financial Assistance Program; Fossil Energy Research and Development; Alcohol Research Programs; Cardiovascular Diseases Research; Arthritis, Musculoskeletal and Skin Diseases Research; Vision Research ALN #s: 10.310; 81.049; 81.089; 93.273; 93.837; 93.846; and 93.867 Award Numbers: AG NIFA 2021-68012-35898; DOE DE-SC0018420; DOE DE-FE0032049; SNAP 5P50AA022538 10; SNAP 5R01HL152692-04; Snp 5R01AR081448-02; and NEI 5 P30 EY001792-45 Questioned Costs: None 2024-004. Finding: Internal Controls over Procurement The University of Illinois Urbana-Champaign and the University of Illinois Chicago did not have sufficient rationale documented for the noncompetitive procurement method selected within their iBuy system at the time of approval of the purchase to allow a reviewer to determine the appropriateness of the procurement method in the Research and Development Cluster. Condition: The University of Illinois Urbana-Champaign and the University of Illinois Chicago’s internal controls over small purchases include review and approval of a purchase requisition form that documents the procurement method selected. Within the iBuy system, when a noncompetitive procurement method is selected, a radio button allows for selection of one of several circumstances where noncompetitive procurement is permitted by 2 CFR 200.320, including that the procurement can only be fulfilled by a single source. When this selection is made, additional information supporting this rationale should be available to the reviewer to determine that this noncompetitive procurement method is appropriate. We noted instances where there was not evidence that this information was available to the reviewer at the time of the approval. Out of twenty-nine small purchase procurement transactions tested at the University of Illinois Urbana-Champaign, for five transactions (17%), there was not sufficient evidence to support that documentation of the noncompetitive procurement method selected was provided at the time of review and approval. Out of eleven small purchase procurement transactions tested at the University of Illinois Chicago, for six transactions (55%), there was not sufficient evidence to support that documentation of the noncompetitive procurement method selected was provided at the time of review and approval. Based on additional information provided to us during our testing, there were no indications that the noncompetitive procurement methods selected were inappropriate. The sample was not intended to be, and was not, a statistically valid sample. 2024-004. Finding: Internal Controls over Procurement (Continued) Criteria: 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. Effective internal controls should include procedures to ensure procurement procedures are properly followed and support is properly maintained as required by 2 CFR 200.318. Cause: University officials stated a single e-procurement system is used to collect and capture procurement-related information. The electronic system required selection of the relevant procurement method in the form of a radio button, but did not require additional information in the central procurement file. Rather, this information was maintained by the requesting unit. Effect: If the procurement purchase requisition forms do not include sufficient supporting documentation of the rationale for the noncompetitive method of procurement selected, the University could approve payments of federal funds to vendors that do not meet federal regulations. (Finding Code 2024-004) Recommendation: We recommend the University of Illinois Urbana-Champaign and the University of Illinois Chicago review current processes within the iBuy system for noncompetitive procurement transactions to ensure sufficient documentation is included to support the rationale for the noncompetitive method of procurement selected. University Response: Accepted. While the University agrees that the supporting documentation was not captured in the electronic payment system, the rationale was available in other University records. The University will take steps to address the recommendation in this finding.