Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria or specific requirement: Entities receiving federal awards must identify in its accounts all federal awards expended and report those amounts on the Schedule of Expenditures of Federal Awards for the period the federal award was expensed. Specifically, in accordance with Uniform Administrative Requirements outlined in 2 CFR 200, the guidance states: Per 2 CFR 200.502, The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Per 2 CFR 200.303, entities must establish and maintain internal controls which provide reasonable assurance that federal award expenditures are in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR 200.510, the Schedule of Expenditures of Federal Awards (SEFA) must be prepared to reflect the awards for the period covered by the auditee’s financial statements. Lastly, section 2 CFR 200.510 states that for costs to be allowable, they should be determined in accordance with generally accepted accounting principles (with exceptions provided in that part). Condition: The University’s year-end cutoff controls allowed for certain costs from Fiscal Year 2022 to not be reported in the Fiscal Year 2022 SEFA but rather reported in the Fiscal Year 2023 SEFA. Context: During our testing of 40 payroll transactions, we found one instance of 2022 fringe benefits being charged to a federal program in 2023. In addition, during our testing of 40 general disbursements transactions, we identified four instances of 2022 costs being charged to federal programs in 2023. Questioned costs: Known amounts of 2022 costs included in the 2023 SEFA was $3,214. (ALNs: 47.041, 47.083, 93.866, and 10.310 Award Numbers: 1663642, 1757324, R01AG059923, and 2022-67020-36410) Cause: Per the University, the cause for the five exceptions were due to: The one payroll exception was due to the 2021-2022 Human Capital Management (HCM) implementation and the issues that implementation brought about. As disclosed in a direct communication with the University’s cognizant agency, the initial custom software used for the allocation of fringe benefit costs did not work appropriately. As a result, throughout 2022, the University dedicated significant resources to address the HCM shortcomings. Then, in 2023, various corrections were made (again, as disclosed to the cognizant agency.) This sample was one of those costs that was identified as not properly being allocated to the federal program in the prior year; thus, was charged to the federal government in the current fiscal year. Three of the four general disbursement exceptions related to the University’s procurement card accrual policy. Currently, the University’s accrues for procurement card purchases through June 23, which leaves seven days of activity that flows into the next fiscal year. Three of our samples relate to procurement card charges incurred during these seven days. The last of the four general disbursements that related to a prior year but reported in the Fiscal Year 2023 was due to a staffing issue. A key employee responsible for monitoring specific departmental charges fell ill and was out for a period of time. Upon the employee’s return, the employee spent time analyzing charges and identified the cost that should have been recorded as a federal charge in the prior year; thus, then charged the federal agency in Fiscal Year 2023. Effect: The University was out of compliance as it relates to identifying and reporting federal costs in the period incurred. Repeat finding: No Recommendation: We recommend the University evaluate its cutoff procedures to ensure federal costs are identified and reported in the correct fiscal year. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
FINDING 2023-001 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles 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: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 15 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The COVID-19 - Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security Act, and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act, was for the purpose of preventing, preparing for, or responding to the novel coronavirus. A sample of 25 claims charged to the program was selected for testing to verify the expenditures were in conformance with the applicable cost principles. Of the 25 claims tested, 6 claims totaling $1,650, each of which paid an individual for work as a contracted security guard, were identified as not being in conformance with the applicable cost principles. Payment to the security guards was made based on an accounts payable voucher signed by the contractor; however, there was not an invoice, time sheet, or other supporting documentation that accompanied the accounts payable voucher. The ineffective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 16 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, documentation could not be provided to support amounts charged to the grant. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure time charged to the grant is properly supported, recorded, and approved.
FINDING 2023-001 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles 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: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 15 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The COVID-19 - Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security Act, and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act, was for the purpose of preventing, preparing for, or responding to the novel coronavirus. A sample of 25 claims charged to the program was selected for testing to verify the expenditures were in conformance with the applicable cost principles. Of the 25 claims tested, 6 claims totaling $1,650, each of which paid an individual for work as a contracted security guard, were identified as not being in conformance with the applicable cost principles. Payment to the security guards was made based on an accounts payable voucher signed by the contractor; however, there was not an invoice, time sheet, or other supporting documentation that accompanied the accounts payable voucher. The ineffective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 16 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, documentation could not be provided to support amounts charged to the grant. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure time charged to the grant is properly supported, recorded, and approved.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting 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): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Maters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit an annual data report to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period, the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports; however, a single employee prepared and submitted the reports without evidence of a review, or oversight process in place to prevent, or detect and correct, errors. INDIANA STATE BOARD OF ACCOUNTS 17 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, for the ESSER I, Year 2 report, the "Total Mandatory Subgrant Amount Expended in Current Reporting Period" was not supported by the School Corporation's records. Actual expenditures from a report provided by the School Corporation did not tie to the amount submitted for the Annual Performance Reporting. The key line item was determined to be overstated by $80,342. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the ESSER I, Year 2 report. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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. . . . (3) Records that identify adequately the source and application of funds for federallyfunded 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. . . ." 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." INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the amounts reported were not supported by the School Corporation's records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure supporting documentation is used and retained for all required reports submitted on behalf of the COVID-19 - Education Stabilization Fund program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting 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): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Maters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit an annual data report to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period, the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports; however, a single employee prepared and submitted the reports without evidence of a review, or oversight process in place to prevent, or detect and correct, errors. INDIANA STATE BOARD OF ACCOUNTS 17 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, for the ESSER I, Year 2 report, the "Total Mandatory Subgrant Amount Expended in Current Reporting Period" was not supported by the School Corporation's records. Actual expenditures from a report provided by the School Corporation did not tie to the amount submitted for the Annual Performance Reporting. The key line item was determined to be overstated by $80,342. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the ESSER I, Year 2 report. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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. . . . (3) Records that identify adequately the source and application of funds for federallyfunded 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. . . ." 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." INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the amounts reported were not supported by the School Corporation's records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure supporting documentation is used and retained for all required reports submitted on behalf of the COVID-19 - Education Stabilization Fund program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting 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): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Maters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit an annual data report to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period, the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports; however, a single employee prepared and submitted the reports without evidence of a review, or oversight process in place to prevent, or detect and correct, errors. INDIANA STATE BOARD OF ACCOUNTS 17 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, for the ESSER I, Year 2 report, the "Total Mandatory Subgrant Amount Expended in Current Reporting Period" was not supported by the School Corporation's records. Actual expenditures from a report provided by the School Corporation did not tie to the amount submitted for the Annual Performance Reporting. The key line item was determined to be overstated by $80,342. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the ESSER I, Year 2 report. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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. . . . (3) Records that identify adequately the source and application of funds for federallyfunded 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. . . ." 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." INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the amounts reported were not supported by the School Corporation's records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure supporting documentation is used and retained for all required reports submitted on behalf of the COVID-19 - Education Stabilization Fund program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting 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): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Maters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit an annual data report to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period, the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports; however, a single employee prepared and submitted the reports without evidence of a review, or oversight process in place to prevent, or detect and correct, errors. INDIANA STATE BOARD OF ACCOUNTS 17 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, for the ESSER I, Year 2 report, the "Total Mandatory Subgrant Amount Expended in Current Reporting Period" was not supported by the School Corporation's records. Actual expenditures from a report provided by the School Corporation did not tie to the amount submitted for the Annual Performance Reporting. The key line item was determined to be overstated by $80,342. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the ESSER I, Year 2 report. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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. . . . (3) Records that identify adequately the source and application of funds for federallyfunded 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. . . ." 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." INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the amounts reported were not supported by the School Corporation's records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure supporting documentation is used and retained for all required reports submitted on behalf of the COVID-19 - Education Stabilization Fund program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting 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): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Maters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit an annual data report to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period, the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports; however, a single employee prepared and submitted the reports without evidence of a review, or oversight process in place to prevent, or detect and correct, errors. INDIANA STATE BOARD OF ACCOUNTS 17 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, for the ESSER I, Year 2 report, the "Total Mandatory Subgrant Amount Expended in Current Reporting Period" was not supported by the School Corporation's records. Actual expenditures from a report provided by the School Corporation did not tie to the amount submitted for the Annual Performance Reporting. The key line item was determined to be overstated by $80,342. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the ESSER I, Year 2 report. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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. . . . (3) Records that identify adequately the source and application of funds for federallyfunded 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. . . ." 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." INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the amounts reported were not supported by the School Corporation's records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure supporting documentation is used and retained for all required reports submitted on behalf of the COVID-19 - Education Stabilization Fund program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: 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, Other Matters Condition and Context 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. INDIANA STATE BOARD OF ACCOUNTS 19 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed, nor implemented a system of internal control to ensure that construction contracts in excess of $2,000, paid from federal grant funds, included a prevailing wage rate clause. One vendor during the audit period was identified that was subject to wage rate requirements; however, the School Corporation did not enter into an agreement with the vendor. As such, there not a contract that included a prevailing wage rate clause. In addition, the School Corporation did not obtain weekly certified payrolls from the vendor completing the construction. 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). . . ." 29 CFR 5.5 states in part: "(a) The Agency head shall cause or require the contracting officer to insert in full 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 acts listed in § 5.1, the following clauses . . . (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. . . . INDIANA STATE BOARD OF ACCOUNTS 20 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, construction contracts entered into did not contain the required wage rate requirements clauses, nor were certified payrolls obtained by the School Corporation. 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. INDIANA STATE BOARD OF ACCOUNTS 21 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a system of internal controls and include the wage rate requirement clause in construction contracts. In addition, certified payrolls should be obtained 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 2023-003 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, Other Matters Condition and Context 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. INDIANA STATE BOARD OF ACCOUNTS 19 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed, nor implemented a system of internal control to ensure that construction contracts in excess of $2,000, paid from federal grant funds, included a prevailing wage rate clause. One vendor during the audit period was identified that was subject to wage rate requirements; however, the School Corporation did not enter into an agreement with the vendor. As such, there not a contract that included a prevailing wage rate clause. In addition, the School Corporation did not obtain weekly certified payrolls from the vendor completing the construction. 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). . . ." 29 CFR 5.5 states in part: "(a) The Agency head shall cause or require the contracting officer to insert in full 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 acts listed in § 5.1, the following clauses . . . (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. . . . INDIANA STATE BOARD OF ACCOUNTS 20 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, construction contracts entered into did not contain the required wage rate requirements clauses, nor were certified payrolls obtained by the School Corporation. 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. INDIANA STATE BOARD OF ACCOUNTS 21 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a system of internal controls and include the wage rate requirement clause in construction contracts. In addition, certified payrolls should be obtained 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 Number: 2023-001 Prior Year Finding: No Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing: 21.027 Pass-Through Entity: Maryland State Department of Education Pass-Through Entity Award Information: 211874 (3/3/2021 – 12/31/2024) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: Compliance: 2 CFR section 200.403 states, in part, except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (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. Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Control – Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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/Context: For one of sixty transactions selected for testing, Anne Arundel County Board of Education (the Board) was unable to provide documentation supporting that the payment was allowable under the program. The invoice supporting an employee reimbursement for summer baking/cooking camp could not be provided. Questioned Costs: $31.93, the amount of the unsupported employee reimbursement. Cause: The Board’s procedures were not sufficient to ensure that it maintained documentation supporting employee reimbursements. Internal controls did not prevent or detect the error. Effect: Unallowable costs could be charged to the program. Recommendation: We recommend that the Board review its policies and procedures to ensure that it maintains documentation supporting employee reimbursements and that this documentation is readily available for audit. There is no disagreement with the audit finding. AACPS acknowledges that a receipt supporting the $31.93 purchase could not be located. AACPS made several attempts during the single audit's development phase to procure the receipt from the employee, but without success. Throughout the audit, the teacher furnished a detailed account of the purchased items and the purpose behind it. Nevertheless, the supervisor had sanctioned the purchase, the teacher provided a valid reason for the missing receipt, and the amount was negligible. The principal had initially approved the purchase, and supervisor authorization is standard procedure for all purchases, either before or after the transaction. Therefore, AACPS believes this finding should be considered immaterial and requests its exclusion from the single audit report. Views of Responsible Officials: There is no disagreement with the finding.
Finding Number: 2023-001 Prior Year Finding: No Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing: 21.027 Pass-Through Entity: Maryland State Department of Education Pass-Through Entity Award Information: 211874 (3/3/2021 – 12/31/2024) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: Compliance: 2 CFR section 200.403 states, in part, except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (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. Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Control – Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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/Context: For one of sixty transactions selected for testing, Anne Arundel County Board of Education (the Board) was unable to provide documentation supporting that the payment was allowable under the program. The invoice supporting an employee reimbursement for summer baking/cooking camp could not be provided. Questioned Costs: $31.93, the amount of the unsupported employee reimbursement. Cause: The Board’s procedures were not sufficient to ensure that it maintained documentation supporting employee reimbursements. Internal controls did not prevent or detect the error. Effect: Unallowable costs could be charged to the program. Recommendation: We recommend that the Board review its policies and procedures to ensure that it maintains documentation supporting employee reimbursements and that this documentation is readily available for audit. There is no disagreement with the audit finding. AACPS acknowledges that a receipt supporting the $31.93 purchase could not be located. AACPS made several attempts during the single audit's development phase to procure the receipt from the employee, but without success. Throughout the audit, the teacher furnished a detailed account of the purchased items and the purpose behind it. Nevertheless, the supervisor had sanctioned the purchase, the teacher provided a valid reason for the missing receipt, and the amount was negligible. The principal had initially approved the purchase, and supervisor authorization is standard procedure for all purchases, either before or after the transaction. Therefore, AACPS believes this finding should be considered immaterial and requests its exclusion from the single audit report. Views of Responsible Officials: There is no disagreement with the finding.
Finding Number: 2023-001 Prior Year Finding: No Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing: 21.027 Pass-Through Entity: Maryland State Department of Education Pass-Through Entity Award Information: 211874 (3/3/2021 – 12/31/2024) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: Compliance: 2 CFR section 200.403 states, in part, except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (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. Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Control – Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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/Context: For one of sixty transactions selected for testing, Anne Arundel County Board of Education (the Board) was unable to provide documentation supporting that the payment was allowable under the program. The invoice supporting an employee reimbursement for summer baking/cooking camp could not be provided. Questioned Costs: $31.93, the amount of the unsupported employee reimbursement. Cause: The Board’s procedures were not sufficient to ensure that it maintained documentation supporting employee reimbursements. Internal controls did not prevent or detect the error. Effect: Unallowable costs could be charged to the program. Recommendation: We recommend that the Board review its policies and procedures to ensure that it maintains documentation supporting employee reimbursements and that this documentation is readily available for audit. There is no disagreement with the audit finding. AACPS acknowledges that a receipt supporting the $31.93 purchase could not be located. AACPS made several attempts during the single audit's development phase to procure the receipt from the employee, but without success. Throughout the audit, the teacher furnished a detailed account of the purchased items and the purpose behind it. Nevertheless, the supervisor had sanctioned the purchase, the teacher provided a valid reason for the missing receipt, and the amount was negligible. The principal had initially approved the purchase, and supervisor authorization is standard procedure for all purchases, either before or after the transaction. Therefore, AACPS believes this finding should be considered immaterial and requests its exclusion from the single audit report. Views of Responsible Officials: There is no disagreement with the finding.
Finding Number: 2023-001 Prior Year Finding: No Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing: 21.027 Pass-Through Entity: Maryland State Department of Education Pass-Through Entity Award Information: 211874 (3/3/2021 – 12/31/2024) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: Compliance: 2 CFR section 200.403 states, in part, except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (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. Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Control – Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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/Context: For one of sixty transactions selected for testing, Anne Arundel County Board of Education (the Board) was unable to provide documentation supporting that the payment was allowable under the program. The invoice supporting an employee reimbursement for summer baking/cooking camp could not be provided. Questioned Costs: $31.93, the amount of the unsupported employee reimbursement. Cause: The Board’s procedures were not sufficient to ensure that it maintained documentation supporting employee reimbursements. Internal controls did not prevent or detect the error. Effect: Unallowable costs could be charged to the program. Recommendation: We recommend that the Board review its policies and procedures to ensure that it maintains documentation supporting employee reimbursements and that this documentation is readily available for audit. There is no disagreement with the audit finding. AACPS acknowledges that a receipt supporting the $31.93 purchase could not be located. AACPS made several attempts during the single audit's development phase to procure the receipt from the employee, but without success. Throughout the audit, the teacher furnished a detailed account of the purchased items and the purpose behind it. Nevertheless, the supervisor had sanctioned the purchase, the teacher provided a valid reason for the missing receipt, and the amount was negligible. The principal had initially approved the purchase, and supervisor authorization is standard procedure for all purchases, either before or after the transaction. Therefore, AACPS believes this finding should be considered immaterial and requests its exclusion from the single audit report. Views of Responsible Officials: There is no disagreement with the finding.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as a cost or used to meet cost-sharing or matching requirements of another federal program, and be adequately documented. A sample of 40 food service program claims were selected for testing to verify the expenditures were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors. For these 10 claims, the invoice section in which the purchase price did not match the bid price was abstracted for further review. Upon further review, it was determined that 59 individual items were not charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the School Corporation was overcharged for multiple items. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented and charged and the approved or agreed upon rates. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases. There was no documented oversight, review, or approval process in place at the School Corporation to ensure proper procedures were followed and price or rate quotations were obtained, or documentation to support limited procurement procedures were conducted and maintained for small purchases. Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation did not obtain price or rate quotes for the three vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number of quotes were not obtained from qualified sources nor was there any documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transaction. Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions, totaling $320,121, were selected for testing. For the four vendors, the School Corporation had not performed procedures to ensure the vendors were not suspended or debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases - (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non- Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed or implemented, which includes segregation of key functions, by management of the School Corporation to ensure that policies and procedures were in place related to procurement and suspension and debarment. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of quotes were not obtained. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure proper procurement procedures are followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Number and Year (or Other Identifying Number): FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals. Any child enrolled in a participating school or summer camp, or attending a SFSP meal service site, who meets the applicable program's definition of "child," may receive meals under the applicable program. In the case of the National School Lunch Program and School Breakfast Program, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children who have been determined ineligible for free or reduced price school meals pay the full price, set by the School Food Authority, for their meals. Children attending SFSP meal service sites receive their meals at no charge. As a general rule, a child's eligibility for free or reduced price meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For a direct certification, annual eligibility determinations are based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its participation in one of these programs; or the school, institution, or sponsor may obtain the information directly from the state or local agency that administers these programs. Certain foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and breakfasts. Direct certified households do not need to complete an application. The Food Service Director was responsible for reviewing the on-line and paper application eligibility status and entering the information into the School Corporation's system (Skyward). There was no evidence of an oversight, review, or approval process to ensure that the income verification, calculations, and information entered into the Skyward system were accurate and the eligibility status was correct. In addition, the Food Service Director was responsible for generating and reviewing the Direct Certification Reports. There was no evidence of an oversight, review, or approval process to ensure that the Direct Certification Reports were generated and reviewed. The lack of internal controls was isolated to the fiscal year ended June 30, 2023. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as a cost or used to meet cost-sharing or matching requirements of another federal program, and be adequately documented. A sample of 40 food service program claims were selected for testing to verify the expenditures were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors. For these 10 claims, the invoice section in which the purchase price did not match the bid price was abstracted for further review. Upon further review, it was determined that 59 individual items were not charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the School Corporation was overcharged for multiple items. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented and charged and the approved or agreed upon rates. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases. There was no documented oversight, review, or approval process in place at the School Corporation to ensure proper procedures were followed and price or rate quotations were obtained, or documentation to support limited procurement procedures were conducted and maintained for small purchases. Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation did not obtain price or rate quotes for the three vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number of quotes were not obtained from qualified sources nor was there any documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transaction. Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions, totaling $320,121, were selected for testing. For the four vendors, the School Corporation had not performed procedures to ensure the vendors were not suspended or debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases - (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non- Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed or implemented, which includes segregation of key functions, by management of the School Corporation to ensure that policies and procedures were in place related to procurement and suspension and debarment. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of quotes were not obtained. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure proper procurement procedures are followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as a cost or used to meet cost-sharing or matching requirements of another federal program, and be adequately documented. A sample of 40 food service program claims were selected for testing to verify the expenditures were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors. For these 10 claims, the invoice section in which the purchase price did not match the bid price was abstracted for further review. Upon further review, it was determined that 59 individual items were not charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the School Corporation was overcharged for multiple items. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented and charged and the approved or agreed upon rates. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases. There was no documented oversight, review, or approval process in place at the School Corporation to ensure proper procedures were followed and price or rate quotations were obtained, or documentation to support limited procurement procedures were conducted and maintained for small purchases. Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation did not obtain price or rate quotes for the three vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number of quotes were not obtained from qualified sources nor was there any documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transaction. Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions, totaling $320,121, were selected for testing. For the four vendors, the School Corporation had not performed procedures to ensure the vendors were not suspended or debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases - (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non- Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed or implemented, which includes segregation of key functions, by management of the School Corporation to ensure that policies and procedures were in place related to procurement and suspension and debarment. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of quotes were not obtained. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure proper procurement procedures are followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: Child Nutrition Cluster - Verification of Free and Reduced Price Lunch Applications Federal Agency: Department of Agriculture Federal Program: National School Lunch Program Assistance Listings Number: 10.555 Federal Award Number and Year (or Other Identifying Number): FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Verification of Free and Reduced Price Lunch Applications (NSLP) Audit Findings: Material Weakness, Other Matters Condition and Context By November 15 of each school year, the Local Educational Agencies (LEA) must verify the current free and reduced price eligibility of households selected from a sample of applications that it has approved for free and reduced price meals, unless the LEA is otherwise exempt from the verification requirement. The verification sample size is based on the total number of approved applications on file on October 1. If the LEA performs the verification function it must be in accordance with instructions provided by the state agency. The LEA must follow up on children whose eligibility status has changed as the result of verification activities to put them in the correct category. As instructed, LEAs must select a sample of applications to be verified utilizing one of the following methods: a. Standard sample size - The lesser of 3 percent or 3,000 of the approved applications on file as of October 1, selected from error-prone applications. For this purpose, error prone applications are those showing household incomes within $100 monthly or $1,200 annually of the income eligibility guidelines for free and reduced price meals. b. Alternative sample sizes - 1) The lesser of 3 percent or 3,000 applications selected at random from approved applications on file as of October 1 of the school year, or (2) The sum of (a) the lesser of 1 percent of all applications identified as error-prone or 1,000 error-prone applications, and (b) the lesser of 1/2 of 1 percent of, or 500, approved applications in which the household provided, in lieu of income information, a case number showing participation in the SNAP, TANF, or FDPIR. In accordance with the above guidance, the School Corporation selected a sample of verifications based on the alternative sample size. As such, the School Corporation was required to review the lesser of three percent or 3,000 applications selected at random from approved applications on file as of October 1 of the 2022-2023 school year. On October 1, the School Corporation had 178 applications on file and determined that 6 applications were required to be verified; however, the School Corporation chose to verify 14 applications. The Food Service Director was responsible for reviewing the applications selected for verification in fiscal year 2022-2023. A second review was performed by the Assistant Food Service Director as indicated on the Verification Collection Report. Of the 14 applications verified by the School Corporation, a sample of 6 applications were selected for testing. The following errors were noted: (1) For two students, 1 application was to have the eligibility status changed from "Free" to "Paid"; however, this change was not updated and made in the School Corporation's system. (2) For five students, 1 application had the eligibility status of "Reduced" in the School Corporation's system as of July 18, 2022, which agreed to the income verification. However, the eligibility status was changed in the School Corporation's system to "Free" as of August 26, 2022. The lack of internal controls and noncompliance was isolated to 2022-2023. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 245.6a states in part: ". . . (f) Verification procedures and assistance for households – . . . (7) Eligibility changes. Based on the verification activities, the local educational agency shall make appropriate modifications to the eligibility determinations made initially. The local educational agency must notify the household of any change. Households must be notified of any reduction in benefits in accordance with paragraph (j) of this section. Households with reduced benefits or that are longer eligible for free or reduced price meals must be notified of their right to reapply at any time with documentation of income or participation in one of the eligible programs in paragraph (a)(1) of this section. . . . (j) Adverse action. If verification activities fail to confirm eligibility for free or reduced price benefits or should the household fail to cooperate with verification efforts, the school or local educational agency shall reduce or terminate benefits, as applicable, as follows: Ten days advance notification shall be provided to households that are to receive a reduction or termination of benefits, prior to the actual reduction or termination. The first day of the 10 day advance notice period shall be the day the notice is sent. The notice shall advise the household of: (1) The change; (2) The reasons for the change; (3) Notification of the right to appeal and when the appeal must be filed to ensure continued benefits while awaiting a hearing and decision; (4) Instructions on how to appeal; and (5) The right to reapply at any time during the school year. The reasons for ineligibility shall be properly documented and retained on file at the local educational agency." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, verifications for free and reduced price applications were not appropriately changed. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure verifications for free and reduced price applications are appropriately changed. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Number and Year (or Other Identifying Number): FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals. Any child enrolled in a participating school or summer camp, or attending a SFSP meal service site, who meets the applicable program's definition of "child," may receive meals under the applicable program. In the case of the National School Lunch Program and School Breakfast Program, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children who have been determined ineligible for free or reduced price school meals pay the full price, set by the School Food Authority, for their meals. Children attending SFSP meal service sites receive their meals at no charge. As a general rule, a child's eligibility for free or reduced price meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For a direct certification, annual eligibility determinations are based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its participation in one of these programs; or the school, institution, or sponsor may obtain the information directly from the state or local agency that administers these programs. Certain foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and breakfasts. Direct certified households do not need to complete an application. The Food Service Director was responsible for reviewing the on-line and paper application eligibility status and entering the information into the School Corporation's system (Skyward). There was no evidence of an oversight, review, or approval process to ensure that the income verification, calculations, and information entered into the Skyward system were accurate and the eligibility status was correct. In addition, the Food Service Director was responsible for generating and reviewing the Direct Certification Reports. There was no evidence of an oversight, review, or approval process to ensure that the Direct Certification Reports were generated and reviewed. The lack of internal controls was isolated to the fiscal year ended June 30, 2023. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as a cost or used to meet cost-sharing or matching requirements of another federal program, and be adequately documented. A sample of 40 food service program claims were selected for testing to verify the expenditures were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors. For these 10 claims, the invoice section in which the purchase price did not match the bid price was abstracted for further review. Upon further review, it was determined that 59 individual items were not charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the School Corporation was overcharged for multiple items. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented and charged and the approved or agreed upon rates. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases. There was no documented oversight, review, or approval process in place at the School Corporation to ensure proper procedures were followed and price or rate quotations were obtained, or documentation to support limited procurement procedures were conducted and maintained for small purchases. Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation did not obtain price or rate quotes for the three vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number of quotes were not obtained from qualified sources nor was there any documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transaction. Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions, totaling $320,121, were selected for testing. For the four vendors, the School Corporation had not performed procedures to ensure the vendors were not suspended or debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases - (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non- Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed or implemented, which includes segregation of key functions, by management of the School Corporation to ensure that policies and procedures were in place related to procurement and suspension and debarment. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of quotes were not obtained. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure proper procurement procedures are followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as a cost or used to meet cost-sharing or matching requirements of another federal program, and be adequately documented. A sample of 40 food service program claims were selected for testing to verify the expenditures were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors. For these 10 claims, the invoice section in which the purchase price did not match the bid price was abstracted for further review. Upon further review, it was determined that 59 individual items were not charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the School Corporation was overcharged for multiple items. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented and charged and the approved or agreed upon rates. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases. There was no documented oversight, review, or approval process in place at the School Corporation to ensure proper procedures were followed and price or rate quotations were obtained, or documentation to support limited procurement procedures were conducted and maintained for small purchases. Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation did not obtain price or rate quotes for the three vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number of quotes were not obtained from qualified sources nor was there any documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transaction. Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions, totaling $320,121, were selected for testing. For the four vendors, the School Corporation had not performed procedures to ensure the vendors were not suspended or debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases - (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non- Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed or implemented, which includes segregation of key functions, by management of the School Corporation to ensure that policies and procedures were in place related to procurement and suspension and debarment. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of quotes were not obtained. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure proper procurement procedures are followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Number and Year (or Other Identifying Number): FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals. Any child enrolled in a participating school or summer camp, or attending a SFSP meal service site, who meets the applicable program's definition of "child," may receive meals under the applicable program. In the case of the National School Lunch Program and School Breakfast Program, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children who have been determined ineligible for free or reduced price school meals pay the full price, set by the School Food Authority, for their meals. Children attending SFSP meal service sites receive their meals at no charge. As a general rule, a child's eligibility for free or reduced price meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For a direct certification, annual eligibility determinations are based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its participation in one of these programs; or the school, institution, or sponsor may obtain the information directly from the state or local agency that administers these programs. Certain foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and breakfasts. Direct certified households do not need to complete an application. The Food Service Director was responsible for reviewing the on-line and paper application eligibility status and entering the information into the School Corporation's system (Skyward). There was no evidence of an oversight, review, or approval process to ensure that the income verification, calculations, and information entered into the Skyward system were accurate and the eligibility status was correct. In addition, the Food Service Director was responsible for generating and reviewing the Direct Certification Reports. There was no evidence of an oversight, review, or approval process to ensure that the Direct Certification Reports were generated and reviewed. The lack of internal controls was isolated to the fiscal year ended June 30, 2023. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Direct costs charged to the Child Nutrition Cluster are to be allowable costs made in compliance with the Allowable Costs/Cost Principles compliance requirement. In general, to be allowable under federal awards, a cost must be necessary and reasonable, conform to any limitations, be consistent with policies and procedures that apply uniformly to all activities, be accorded consistent treatment, not be included as a cost or used to meet cost-sharing or matching requirements of another federal program, and be adequately documented. A sample of 40 food service program claims were selected for testing to verify the expenditures were in conformance with the applicable cost principes. Of the 40 claims tested, 10 claims contained errors. For these 10 claims, the invoice section in which the purchase price did not match the bid price was abstracted for further review. Upon further review, it was determined that 59 individual items were not charged in accordance with contracted prices. As a result, the School Corporation was over-charged $523. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. . . . (g) Be adequately documented. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the School Corporation was overcharged for multiple items. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented and charged and the approved or agreed upon rates. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases. There was no documented oversight, review, or approval process in place at the School Corporation to ensure proper procedures were followed and price or rate quotations were obtained, or documentation to support limited procurement procedures were conducted and maintained for small purchases. Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation did not obtain price or rate quotes for the three vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. For the three vendors tested, totaling $149,061, an adequate number of quotes were not obtained from qualified sources nor was there any documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transaction. Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions, totaling $320,121, were selected for testing. For the four vendors, the School Corporation had not performed procedures to ensure the vendors were not suspended or debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases - (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non- Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed or implemented, which includes segregation of key functions, by management of the School Corporation to ensure that policies and procedures were in place related to procurement and suspension and debarment. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded, and for small purchases an adequate number of quotes were not obtained. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure proper procurement procedures are followed and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistant Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied, prepared and submitted by one employee without an oversight or review process in place to prevent, or detect and correct, errors. In addition, three of the six reports submitted during the audit period contained errors. The errors were as follows: The ESSER II, Year 1 report was not supported by the School Corporation's records, was not accurate and complete, and was not mathematically accurate. The ESSER II, Year 2 report was not supported by the School Corporation's records, was not accurate and complete, and was not mathematically accurate. Also, expenditures for the key line item of "Supplies" as reported did not agree to the School Corporation's ledger. The ESSER III, Year 2 key line of "Supplies" expenditures did not agree to the School Corporation's ledger. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the three reports noted above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, ESSER reports were not supported by the School Corporation's records, were not accurate and complete, and were not mathematically accurate. Additionally, key line items were not supported by the records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure supporting documentation is used and retained for all required reports submitted on behalf of the Education Stabilization Fund program funds. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistant Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied, prepared and submitted by one employee without an oversight or review process in place to prevent, or detect and correct, errors. In addition, three of the six reports submitted during the audit period contained errors. The errors were as follows: The ESSER II, Year 1 report was not supported by the School Corporation's records, was not accurate and complete, and was not mathematically accurate. The ESSER II, Year 2 report was not supported by the School Corporation's records, was not accurate and complete, and was not mathematically accurate. Also, expenditures for the key line item of "Supplies" as reported did not agree to the School Corporation's ledger. The ESSER III, Year 2 key line of "Supplies" expenditures did not agree to the School Corporation's ledger. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the three reports noted above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, ESSER reports were not supported by the School Corporation's records, were not accurate and complete, and were not mathematically accurate. Additionally, key line items were not supported by the records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure supporting documentation is used and retained for all required reports submitted on behalf of the Education Stabilization Fund program funds. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistant Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied, prepared and submitted by one employee without an oversight or review process in place to prevent, or detect and correct, errors. In addition, three of the six reports submitted during the audit period contained errors. The errors were as follows: The ESSER II, Year 1 report was not supported by the School Corporation's records, was not accurate and complete, and was not mathematically accurate. The ESSER II, Year 2 report was not supported by the School Corporation's records, was not accurate and complete, and was not mathematically accurate. Also, expenditures for the key line item of "Supplies" as reported did not agree to the School Corporation's ledger. The ESSER III, Year 2 key line of "Supplies" expenditures did not agree to the School Corporation's ledger. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the three reports noted above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, ESSER reports were not supported by the School Corporation's records, were not accurate and complete, and were not mathematically accurate. Additionally, key line items were not supported by the records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure supporting documentation is used and retained for all required reports submitted on behalf of the Education Stabilization Fund program funds. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: Special Education Cluster - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years: 20611-043-PN01, 21611-043-PN01, 21619-43-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-001. Condition and Context The School Corporation is a member of the Northwest Indiana Special Education Cooperative (Cooperative). During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 20611-043-PN01, 21611-043-PN01, and 21619-43-PN01 grant awards could not be verified for the individual member schools. The non-public school share funds for all member schools were comingled and the aggregate amount of expenditures was then allocated to the member schools on a percentage basis. These allocations were the amounts reported to the IDOE. As such, we were unable to identify which expenditures were for each school in order to verify the minimum amount per the grant award was expended and properly reported to the IDOE as required. The lack of internal controls and noncompliance were isolated to the 20611-043-PN01, 21611-043-PN01, and 21619-43-PN01 grant awards. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 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: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal control, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, it could not be determined if the School Corporation expended their required non-public proportionate share. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure that the required non-public proportionate share amounts are spent 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 2023-002 Subject: Special Education Cluster - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years: 20611-043-PN01, 21611-043-PN01, 21619-43-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-001. Condition and Context The School Corporation is a member of the Northwest Indiana Special Education Cooperative (Cooperative). During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 20611-043-PN01, 21611-043-PN01, and 21619-43-PN01 grant awards could not be verified for the individual member schools. The non-public school share funds for all member schools were comingled and the aggregate amount of expenditures was then allocated to the member schools on a percentage basis. These allocations were the amounts reported to the IDOE. As such, we were unable to identify which expenditures were for each school in order to verify the minimum amount per the grant award was expended and properly reported to the IDOE as required. The lack of internal controls and noncompliance were isolated to the 20611-043-PN01, 21611-043-PN01, and 21619-43-PN01 grant awards. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 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: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal control, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, it could not be determined if the School Corporation expended their required non-public proportionate share. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure that the required non-public proportionate share amounts are spent 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 2023-003 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 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: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Modified Opinion Condition and Context 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 had not designed, nor implemented a system of internal controls to ensure that construction contracts in excess of $2,000 paid from federal grant funds included a prevailing wage rate clause. Two construction contracts, totaling $1,543,551 were paid from the COVID-19 - Education Stabilization Fund grant funds during the audit period. Both contracts were tested; however, neither contract contained the required prevailing wage rate clause. Certified payrolls were submitted by the contractor for one of the contracts after the construction was completed for the contract which totaled $1,424,051; however, certified payrolls could not be obtained for the contract which totaled $119,500. 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). . . ." 29 CFR 5.5 states in part: "(a) The Agency head shall cause or require the contracting officer to insert in full 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 acts listed in § 5.1, the following clauses . . . (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) 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). . . ." 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 A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, construction contracts entered into did not contain the required wage rate requirements clauses nor were certified payrolls timely obtained by the School Corporation. 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 that the School Corporation's management establish a system of internal controls and include the wage rate requirement clause in construction contracts. In addition, certified payrolls should be obtained 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 2023-004 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings 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: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation paid $1,467,550 from the COVID-19 - Education Stabilization Fund program for two improvement projects which exceeded the School Corporation's capitalization threshold. The improvements were not added to the School Corporation's capital asset listing. Additionally, the School Corporation completed a capital asset inventory as required; however, because material improvements were not included in the capital asset listing, it was determined that the School Corporation did not reconcile differences in the property records as required. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, improvements purchased were not properly added to the capital asset listing. In addition, a reconcilement between the inventory records and the property records were not completed. Noncompliance with the grant agreement and the compliance requirement could result in the loss of federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all assets. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject 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 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: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Modified Opinion Condition and Context 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 had not designed, nor implemented a system of internal controls to ensure that construction contracts in excess of $2,000 paid from federal grant funds included a prevailing wage rate clause. Two construction contracts, totaling $1,543,551 were paid from the COVID-19 - Education Stabilization Fund grant funds during the audit period. Both contracts were tested; however, neither contract contained the required prevailing wage rate clause. Certified payrolls were submitted by the contractor for one of the contracts after the construction was completed for the contract which totaled $1,424,051; however, certified payrolls could not be obtained for the contract which totaled $119,500. 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). . . ." 29 CFR 5.5 states in part: "(a) The Agency head shall cause or require the contracting officer to insert in full 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 acts listed in § 5.1, the following clauses . . . (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) 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). . . ." 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 A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, construction contracts entered into did not contain the required wage rate requirements clauses nor were certified payrolls timely obtained by the School Corporation. 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 that the School Corporation's management establish a system of internal controls and include the wage rate requirement clause in construction contracts. In addition, certified payrolls should be obtained 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 2023-004 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings 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: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation paid $1,467,550 from the COVID-19 - Education Stabilization Fund program for two improvement projects which exceeded the School Corporation's capitalization threshold. The improvements were not added to the School Corporation's capital asset listing. Additionally, the School Corporation completed a capital asset inventory as required; however, because material improvements were not included in the capital asset listing, it was determined that the School Corporation did not reconcile differences in the property records as required. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, improvements purchased were not properly added to the capital asset listing. In addition, a reconcilement between the inventory records and the property records were not completed. Noncompliance with the grant agreement and the compliance requirement could result in the loss of federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all assets. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject 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 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: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Modified Opinion Condition and Context 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 had not designed, nor implemented a system of internal controls to ensure that construction contracts in excess of $2,000 paid from federal grant funds included a prevailing wage rate clause. Two construction contracts, totaling $1,543,551 were paid from the COVID-19 - Education Stabilization Fund grant funds during the audit period. Both contracts were tested; however, neither contract contained the required prevailing wage rate clause. Certified payrolls were submitted by the contractor for one of the contracts after the construction was completed for the contract which totaled $1,424,051; however, certified payrolls could not be obtained for the contract which totaled $119,500. 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). . . ." 29 CFR 5.5 states in part: "(a) The Agency head shall cause or require the contracting officer to insert in full 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 acts listed in § 5.1, the following clauses . . . (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) 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). . . ." 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 A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, construction contracts entered into did not contain the required wage rate requirements clauses nor were certified payrolls timely obtained by the School Corporation. 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 that the School Corporation's management establish a system of internal controls and include the wage rate requirement clause in construction contracts. In addition, certified payrolls should be obtained as required. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.