Findings Citing § 200.303

Program: AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.090 – Guardianship Assistance; AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.575 Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Grants to States for Medicaid – Allowable Cost/Cost Principles Grant Number & Year: 243NE406S2514, FFY 2024; 253NE406S2514, FFY 2025; 2501NEGARD, FFY 2025; 2201NETANF, FFY 2022; 2401NESCSS, FFY 2024; 2501NESCSS, FFY 2025; 2401NERCMA, FFY 2024; 2401NECCDD, FFY 2024; 2501NECCDD, FFY 2025; 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025; 2401NEADPT, FFY 2024; 2501NEADPT, FFY 2025; 2405NE5021, FFY 2024; 2505NE5021, FFY 2025; 2405NE5ADM, FFY 2024; 2505NE5ADM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: Per 2 CFR § 400.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Agriculture adopted the OMB Uniform Guidance as its policies and procedures for uniform administrative requirements, cost principles, and audit requirements for Federal awards. 45 CFR § 75.303 (October 1, 2024) and 2 CFR § 200.303 (January 1, 2024, and January 1, 2025) require the State to “maintain effective internal control over the Federal award that provides reasonable assurance that the [State] is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2024) and 2 CFR § 200.403 (January 1, 2024, and January 1, 2025) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2024) and 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per 45 CFR § 75.405(a) (October 1, 2024) and 2 CFR § 200.405(a) (January 1, 2024, and January 1, 2025), costs are allocable to Federal awards or other cost objectives if the costs involved are assignable to those Federal awards or other cost objectives in accordance with relative benefits received. Good internal control and sound accounting practices require policies and procedures to ensure that all administrative costs are allocated to the proper funding source for activities performed. 45 CFR § 75.511 (October 1, 2024) and 2 CFR § 200.511 (January 1, 2024, and January 1, 2025) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations also requires that when the audit findings were not corrected or only partially corrected, the auditee must describe the reasons for the findings recurrence and planned corrective action. Condition: The Agency did not properly charge Federal programs for 9 of 27 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2024-038 Questioned Costs: $2,743,946 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 27 PACAP allocations. We noted errors for 9 of 27 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharged to be questioned costs. We noted the following: RMTS Allocations For four of four allocations tested based on the Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs. Additionally, costs were included in the allocations that were either misassigned or unrelated to the cost centers being allocated. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The September quarter allocation included 4,481 activity observations and the March quarter included 4,402 observations. We noted the following: o Four responses were invalidated by supervisors; however, these responses were originally left blank as they were not completed by employees. This resulted in four additional responses being created as activities funded by the State. o For two responses that were not included in the sub-sample for supervisory review, the supervisor performed a review and invalidated the moments. As these were not originally selected for supervisor review, this invalidation resulted in two additional responses being created and recorded as activities funded by the State as well as the original responses remaining under their original funding source. o One response was originally recorded as SNAP and was later invalidated by the supervisor. This moment was incorrectly not moved to “Non-DHHS Activity” and remained coded as SNAP on the final allocation. • The Agency did not properly allocate observations in accordance with the PACAP for 7 of the 81 activities in the quarter ended September 31, 2024, and 2 of the 75 activities in the quarter ended March 31, 2025: o Six of the observations included Child Protection Initial Assessment. Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. The Agency did not properly update the formula used to calculate each quarterly allocation for Child Protection Initial Assessment from the previous quarter. In both quarters tested, this resulted in overcharges to the Adoption and Guardianship programs and undercharges to the Foster Care program. o Two of the observations should have been allocated evenly between SNAP and the State; however, the observation was incorrectly allocated three ways, between SNAP, the State, and the Social Services Block Grant Program (SSBG). This resulted in overcharges to SSBG and undercharges to SNAP and the State. o One of the observations should have been allocated with two-thirds to the Temporary Assistance for Needy Families Program (TANF) and one-third to SNAP; however, the observation was incorrectly allocated evenly between TANF and SNAP. This resulted in overcharges to SNAP and undercharges to TANF. Additionally, two business units were misassigned to the RMTS allocations. • One business unit with total charges of $125,246 during State fiscal year 2025 was assigned to the Economic Assistance RMTS allocation when it should have been assigned to the P&S RMTS allocation. Impacts of this error included undercharges to Foster Care and overcharges to SNAP. • The second business unit with total charges of $5,433,458 during State fiscal year 2025 was assigned to the P&S RMTS; however, it should not have been assigned to either RMTS allocation as the costs were related to the Youth Rehabilitation Treatment Center in Kearney, Nebraska. This resulted in overcharges to Federal programs, including Foster Care and Adoption Assistance. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Time Study Allocation One allocation tested was based on a time study of the Legal and Regulatory Services Team for the quarter ended March 31, 2025, which allocated $1,126,957 of administrative costs. The time study was completed annually by the attorneys of the Legal and Regulatory Services Team. We noted the following issues regarding the time study and the allocation tested. • The Agency’s processes and procedures for the time study were not adequately defined in the PACAP, and there were no written processes and procedures for how the time study would be completed. • The time study used for the basis of the allocation tested consisted of only 26 of the 33 attorneys that were part of the team, and the time study was only conducted during a two-week period. Additionally, a paralegal also completed the time study, which was against the Agency’s stated procedures. • An Internal Auditor’s payroll costs were also included in the allocation; however, the Internal Auditor was not part of the Legal and Regulatory Services Team. This resulted in $16,281 in misallocated costs. • Hours coded on the time study for “Child Welfare” were all allocated directly to Foster Care; however, the “Child Welfare” hours should have also been allocated to Adoption, Guardianship, and other State programs. • Hours coded on the time study for “TANF” were incorrectly charged to LIHEAP. As the same time study was used for allocations for all four quarters of the State fiscal year 2025, we calculated the impact for all four quarters. Questioned costs by program for the Time Study allocation are as follows: See Schedule of Findings and Questioned Costs for chart/table. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $39.5 million in costs were allocated using these counts during the State fiscal year 2025. We tested the allocation for the quarter ended September 30, 2024, and noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers they used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for the allocation tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for the quarter tested and overcharging all other programs in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP, for September 2024 as of August 2025. The detailed report did not agree to the summary spreadsheets. • Other recipient counts were off due to clerical errors: o The recipient count for the TANF Solely State Funded Plan was incorrect. The recipient count used by the Agency was zero, but the supported number was 2,017 recipients. o The recipient count for SNAP included 1,609 more recipients than what was supported. Having recalculated the quarter’s allocation, based on the supported recipient counts available, we have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 36 cost centers allocated to State and Federal programs through labor hours. Over $295.6 million in costs were allocated by labor hours during the 2025 State fiscal year. We tested seven of these allocations, and one had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. For the allocation tested for Cost Center 25C23545, we noted that five business units related to Home and Community Based Services were being incorrectly mapped to Cost Center 25C23545. Additionally, the labor hours statistic should have allocated the costs throughout the Finance and Program Integrity Section, but it only allocated costs to one unit within this section. These errors resulted in CHIP being overcharged $85,174. Time and Effort Report Allocations We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended September 30, 2024, which allocated $1,077,853 of administrative costs, based on Time & Effort reports. During testing, we noted the payroll costs for 71 employees were charged to the cost center; however, four of the employees’ payroll costs should not have been charged to the cost center. The four employees included three Child and Family Services Specialist Supervisors (CFSSS), and a Program Specialist. The three CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Because of this error, the following programs were overcharged. See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $17,529,039 in project costs for State fiscal year 2025. The iServe Nebraska Portal, which is an online application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021 and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs only to the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that are utilizing, or intend to utilize, the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated the following: As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan. In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the previous fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The allocation method was last updated by the Agency, and approved by the Federal grantor, as of September 28, 2023, to include the Child Care program and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program (AABD) and State Disability Program (SDP). However, the Agency-provided implementation date for Child Care, AABD, and SDP was the same as the implementation date for the initial four programs, July 26, 2021. So it remains unclear why all benefiting programs were not being included in the allocation of this cost center from the start of implementation. • The SSBG program began implementation in October 2023 and went live in April 2024, but no costs have been allocated to this program. Similarly, the Refugee Assistance program began implementation in March 2024 and went live in July 2024, but no costs have been allocated to this program either. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2025 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure the following: employee pay is recorded correctly; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: The Agency agrees with the finding.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance Program – Allowability & Eligibility Grant Number & Year: ERAE1185, grant period ending 9/30/2025 Federal Grantor Agency: U.S. Department of the Treasury Criteria: Title III, Subtitle B, Section 3201(f)(2), of the American Rescue Plan Act, 2021, Pub. L. No. 117-2 (March 11, 2021) states, in relevant part the following: ELIGIBLE HOUSEHOLD. - The term ‘‘eligible household’’ means a household of 1 or more individuals who are obligated to pay rent on a residential dwelling and with respect to which the eligible grantee involved determines that— * * * * (C) the household is a low-income family (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)). Low-income family is defined in 42 U.S.C § 1437a(b)(2)(A) as follows: [F]amilies whose incomes do not exceed 80 per centum of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families . . . . Per 2 CFR § 1000.10 (January 1, 2024), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2024): 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. Question 4 of the Frequently Asked Questions (FAQ) guidance document (Revised December 4, 2024), issued by the U.S. Department of the Treasury, for the Emergency Rental Assistance program, states, in relevant part, the following: If a written attestation without further verification is relied on to document the majority of the applicant’s income, the grantee must reassess the household’s income every three months, by obtaining appropriate documentation or a new self-attestation. Question 7 of the FAQ guidance document states that other expenses that can be paid for include “reasonable accrued late fees.” Good internal control requires procedures to ensure that adequate supporting documentation is obtained and utilized during the application review process. Good internal control also requires procedures to ensure compliance with Federal regulations. 2 CFR § 200.511 (January 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of that same regulation states, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Documentation to support the eligibility and the amount paid for 5 of 40 payments/households tested was not adequate. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-067 Questioned Costs: $1,580 known Statistical Sample: No Context: We tested 40 assistance payments. We noted the following: • For one payment, adequate income verification was not performed. The applicant attested that the household did not have income. Subsequent payments were made for rent over three months after the attestation. The Agency neither reassessed the household’s income nor obtained a new self-attestation, as required per the FAQ. This resulted in questioned costs of $1,277. • For four payments, the payment amount was incorrect. o For three payments, we did not agree with the amount paid for late fees. For rent paid for future months, it was the Agency’s policy to pay the late fee if the payment was approved after the 15th of the previous month. For example, if the Agency approved a rental payment for the month of October 2024 on September 16, 2024, the Agency would also pay a late fee for October 2024. However, per review of the actual date paid, the late fees paid were either excessive or should not have been paid at all. In total, we questioned $146 in excessive late fees. o For one payment, the Agency calculated a payment amount of $1,342; however, after reviewing the lease, we calculated an amount of $1,185, a difference of $157. Federal payment errors for the sample tested were $1,580. The total sample tested was $64,938, and assistance payments for the year totaled $18,220,684. Based on the sample tested, the dollar error rate for the sample was 2.43% ($1,580/$64,938), which estimated the potential dollars at risk for fiscal year 2025 to be $442,763 (dollar error rate multiplied by the population). Cause: Inadequate procedures to ensure that self-attestations of income were obtained every three months. Inadequate procedures to ensure the payment amount was correct, and late fees were reasonable. Effect: Increased risk of loss or misuse of funds and noncompliance with Federal guidelines. Recommendation: We recommend the Agency strengthen policies and procedures to ensure applicants are eligible for assistance, and payment amounts are reasonable and proper. Management Response: Management agrees with the finding presented.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Allowability Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b) (July 1, 2024) states, in relevant part, the following: A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria provided in paragraph (b)(1) of this section or is enumerated in paragraph (b)(3) of this section; provided that, in the case of a use of funds for a capital expenditure under paragraph (b)(1) or (b)(3) of this section, the use of funds must also meet the criteria provided in paragraph (b)(4) of this section. Treasury may also articulate additional eligible programs, services, or capital expenditures from time to time that satisfy the eligibility criteria of this paragraph (b), which shall be eligible under this paragraph (b). (1) Identifying eligible responses to the public health emergency or its negative economic impacts. (i) A program, service, or capital expenditure is eligible under this paragraph (b)(1) if a recipient identifies a harm or impact to a beneficiary or class of beneficiaries caused or exacerbated by the public health emergency or its negative economic impacts and the program, service, or capital expenditure responds to such harm. (ii) A program, service, or capital expenditure responds to a harm or impact experienced by an identified beneficiary or class of beneficiaries if it is reasonably designed to benefit the beneficiary or class of beneficiaries that experienced the harm or impact and is related and reasonably proportional to the extent and type of harm or impact experienced. * * * * (3) Enumerated eligible uses: responses presumed reasonably proportional. A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts: * * * * (ii) Responding to the negative economic impacts of the public health emergency for purposes including: * * * * (D) Assistance to tourism, travel, hospitality, and other impacted industries for programs, services, or capital expenditures, including support for payroll costs and covered benefits for employees, compensating returning employees, support for operations and maintenance of existing equipment and facilities, and technical assistance[.] 31 CFR § 35.6(c) (July 1, 2024) states the following: Providing premium pay to eligible workers. A recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work or to provide grants to eligible employers that have eligible workers who perform essential work, provided that any premium pay or grants provided under this paragraph (c) must respond to eligible workers performing essential work during the COVID-19 public health emergency. A recipient uses premium pay or grants provided under this paragraph (c) to respond to eligible workers performing essential work during the COVID-19 public health emergency if: (1) The eligible worker's total wages and remuneration, including the premium pay, is less than or equal to 150 percent of the greater of such eligible worker’s residing State’s or county’s average annual wage for all occupations as defined by the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics; (2) The eligible worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. 207); or (3) The recipient has submitted to the Secretary a written justification that explains how providing premium pay to the eligible worker is responsive to the eligible worker performing essential work during the COVID-19 public health emergency (such as a description of the eligible workers’ duties, health, or financial risks faced due to COVID-19, and why the recipient determined that the premium pay was responsive despite the worker's higher income). 31 CFR § 35.3 (July 1, 2024) defines “premium pay,” in relevant part, as follows: Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID-19 public health emergency. Such amount may not exceed $25,000 in total over the period of performance with respect to any single eligible worker. H.J. Res 7 (2023) states the following: Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That, pursuant to section 202 of the National Emergencies Act (50 U.S.C. 1622), the national emergency declared by the finding of the President on March 13, 2020, in Proclamation 9994 (85 Fed. Reg. 15337) is hereby terminated. Approved April 10, 2023. Additionally, the “Final Rule” was released by the U.S. Department of the Treasury on January 6, 2022. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 1. General Provisions: Structure and Standards, a. Standards for Identifying a Public Health or Negative Economic Impact, Standards: Designating a Negative Economic Impact, states the following, in relevant part: (Page 4344) First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class. The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID-19 public health emergency. A recipient should first consider whether an economic harm exists and then whether this harm was caused or made worse by the COVID-19 public health emergency. * * * * Second, the response must be designated to address the identified economic harm or impact resulting from or exacerbated by the public health emergency. In selecting responses, the recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact. * * * * Responses must be reasonably designed to benefit the individual or class that experienced the negative economic impact or harm. Uses of funds should be assessed based on their responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary. Responses must also be related and reasonably proportional to the extent and type of harm experienced. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, a. Public Sector Capacity and Workforce, states the following, in relevant part: (Page 4386) The final rule allows for an expanded set of eligible uses to restore and support public sector employment. Eligible uses include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring. * * * * The final rule provides two options to restore pre-pandemic employment, depending on recipient’s needs. Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without undergoing further analysis. Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline, by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire. * * * * To pursue the second option, recipients should undergo the analysis provided below. In short, this option allows recipients to pay for payroll and covered benefits associated with the recipient increasing its number of budgeted full-time equivalent employees (FTEs) up to 7.5 percent above its pre-pandemic employment baseline, which adjusts for the continued underinvestment in state and local governments since the Great Recession. * * * * Funds may be used to maintain current compensation levels, with adjustments for inflation, in order to prevent layoffs that would otherwise be necessary. Recipients must be able to substantiate that layoffs were likely in the absence of SLFRF funds and would be substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment. * * * * Funds may be used to provide worker retention incentives, which are designed to persuade employees to remain with the employer as compared to other employment options. Recipients must be able to substantiate that the employees were likely to leave employment in the absence of the retention incentive and should document their assessment. * * * * All worker retention incentives must be narrowly tailored to need and should not exceed incentives traditionally offered by the recipient or compensation that alternative employers may offer to compete for the employees. Further, because retention incentives are intended to provide additional incentive to remain with the employer, they must be entirely additive to an employee’s regular rate of wages and other remuneration and may not be used to reduce or substitute for an employee’s normal earnings. Treasury will presume that retention incentives that are less than 25 percent of the rate of base pay for an individual employee or 10 percent for a group or category of employees are reasonably proportional to the need to retain employees, as long as the other requirements are met. The Final Rule, Footnote 230, states the following, in relevant part: (Page 4379) Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries. Per 2 CFR § 1000.10 (January 1, 2024), “[T]he Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200.” 2 CFR § 200.303 (January 1, 2024) states, in relevant part, the following: 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. Per 2 CFR § 200.403 (January 1, 2024), costs must be necessary and reasonable for the performance of the Federal award. Costs must also be adequately documented. Good internal control and sound business practices require procedures for ensuring that: 1) premium pay is paid to only eligible individuals; 2) expenditures are adequately supported; and 3) all expenditures are for allowable purposes. Condition: The State lacked procedures to ensure that: • Grants issued to beneficiaries for worker retention and incentives were used for such purposes. • Premium pay paid to eligible individuals was for work performed during the COVID-19 public health emergency. Repeat Finding: 2024-069 Questioned Costs: $2,619,690 known Statistical Sample: No Context: We randomly selected 40 payments to test. We also judgmentally selected 12 payments and 7 journal entries to test. We noted the following: Payments to Nursing Facilities & Assisted Living Centers for Employee Retention and Recruitment LB 1014 (2022), section 28, appropriated $12,500,000 from the CSLFRF grant to the Department of Health and Human Services (DHHS) for State fiscal year 2025 to be paid out to Medicaid-certified nursing facilities. The funds were to be used to provide supplemental incentive payments for direct care staff members employed at the nursing facilities. DHHS paid out $12,500,000 to Medicaid-certified nursing facilities during State fiscal year 2025. During testing of 40 randomly selected CSLFRF payments, we tested five payments, totaling $452,690, made to Medicaid-certified nursing facilities. We asked for documentation of how DHHS ensured that the payments were used for allowable employee retention and recruitment programs, and for any documented assessments that were required by the Final Rule for worker incentive programs. According to DHHS, the funds were paid out in accordance with the requirements of LB 1014 (2022). Additionally, during June and July 2024, DHHS obtained signed attestations from all entities that had previously received funds in fiscal years 2023 and 2024, attesting that the entity was aware that funds provided could be used only to enhance employee recruitment and retention and that funds were used for such purpose. These forms applied only to funds already received at the time and did not include language referencing that they would apply to those payments issued in the State fiscal year 2025. DHHS claimed to have performed additional monitoring procedures in response to our finding in fiscal year 2024, which consisted of reviewing four entities that received funds in fiscal year 2024. The APA noted that this review consisted of only 4 of the 181 entities that received payments in fiscal year 2025, and the review considered only the use of funds disbursed prior to fiscal year 2025. Lastly, the APA noted that the documentation on file for DHHS’ review did not contain any analysis to support that funds were allowed for allowable retention and recruitment. Because no documentation was provided to support that funds were used for allowable employee retention and recruitment programs, we questioned all costs for the five payments tested, totaling $452,690, and noted that all $12,500,000 disbursed are dollars at risk. Premium Pay LB 1412 (2024), section 112, allowed the Governor to reallocate previously appropriated CSLFRF dollars that could not otherwise be obligated by the December 31, 2024, obligation deadline. Under this authority, the Office of the Governor authorized $3,007,058 to be used for premium pay to State employees. In December 2024, May 2025, and June 2025, DHHS posted three journal entries to move payroll costs of $2,167,000 to the CSLFRF grant. During our review of these entries, totaling $2,167,000, we noted that DHHS had determined the allowability of the entry by calculating the total amount of allowable premium pay during the grant period. DHHS had identified premium pay, totaling $10,537,975, paid to employees providing mental health services as part of the Lincoln Regional Center and Norfolk Regional Center Sex Offender Treatment Program for work dates from December 23, 2019, through April 30, 2023, and stated that this was more than the $9,760,287 in premium pay coded to the grant as of June 30, 2025, including the $2,167,000 tested; therefore, the entry was allowable. However, during our review, we noted the following deficiencies in DHHS’ review: • DHHS included $5,054,478 of payroll costs associated with work performed prior to the implementation of any premium pay on November 1, 2021, and after the end of the public health emergency on April 10, 2023, which is not allowable. • DHHS projections did not include any review of employee exemption status or total wages to support that moving payroll costs to the grant was responsive to employees performing essential work. Further, DHHS had no written justification on file to support the responsiveness of premium pay for any employees. We noted 28 employees who were exempt with wages over 150% of the State average. • DHHS did not properly cap the amount of premium pay at $25,000 per person for the life of the grant. Rather, DHHS capped premium pay at $25,000 per employee per each fiscal year during the grant. • Despite attempting to cap premium pay at $13 per hour for all employees, DHHS did not properly calculate the amount of premium pay earned by each employee. Employees were afforded a 20-30% pay increase for premium pay; however, DHHS calculated the premium pay as 20-30% of the new rate (including premium pay) instead of the employees’ original pay rate, resulting in overstatements of 3-7%. • In determining the amount of premium pay, DHHS erroneously included duplicate payroll lines, totaling $709,206, of gross pay. Taking all of the deficiencies into consideration, the APA calculated total allowable premium pay for the grant period to be only $5,001,281, which was $4,759,005 less than the amount of premium pay coded to the grant. The APA observed that, prior to fiscal year 2025, the agency had moved $7,593,287 of payroll costs to the grant. Therefore, all $2,167,000 of these journal entries tested are questioned costs. Cause: Inadequate procedures to ensure: 1) grants to nursing and assisted-living facilities were used for allowable purposes; and 2) premium pay was paid only to individuals who performed work during the COVID-19 public health emergency and at allowable rates. Effect: Without adequate supporting documentation and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the State strengthen procedures for ensuring that all Federal funds are used for intended and allowable purposes. Management Response: Department of Health and Human Services Agency disagrees with this finding. The methods utilized to calculate claims over the $25k per person cap and the max $13/hour increase cap were erroneous. DHHS was able to consolidate the entire data set for the appropriation periods between State fiscal year 2022 and State fiscal year 2025 and showed that, based on allowable claims for each period, there was a total of $10,537,974.76 possible to be claimed, and $9,760,286.67 actually claimed. APA Response: As noted above, 31 CFR § 35.3 (July 1, 2024) defines “premium pay” as an additional amount up to $13 per hour that is paid to an eligible worker for all work performed by the eligible worker during the COVID-19 public health emergency and states that it “may not exceed $25,000 in total over the period of performance with respect to any single eligible worker.” Review of DHHS’s analysis of $10,537,974.76 noted that it includes premium pay in excess of the $25,000 per person total limit for the period of performance for 138 individuals, totaling $4,208,829.04.

Information on the federal program: Subject: Special Education Cluster (IDEA) – Internal Controls Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-131-PN01, 23611-131-PN01, Contract 78674 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs- Cost Principles Audit Finding: Material Weakness, Other Matters Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs- Cost Principles compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $1,250 (Known questioned costs) Context: We noted that for 11 of the 40 payroll samples selected, the School Corporation did not have employees fill out semi-annual certifications to support the percentage of their payroll charged to the Special Education Cluster funds. Additionally, for one payroll sample, we noted that the employee was incorrectly paid $1,250 using Special Education Cluster funds prior to the employee performing work related to the Special Education Cluster. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2023-003. Recommendation: We recommend management ensure semi-annual certifications are completed for all employees charged to the grant awards at 100%. We recommend management establish a documented review by management of semi-annual certifications to ensure time charged to grant awards is allowable and allocable based on work performed in accordance with grant requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Subject: Title I Grants to Local Educational Agencies - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listing Number: 84.010A Federal Award Numbers and Years (or Other Identifying Numbers): S010A220014, S010A230014, S010A240014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.430 states in part: 1. Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: We noted that for 13 of the 40 payroll samples selected, the School Corporation did not have employees fill out semi-annual certifications to support the percentage of their payroll charged to the Title I grants. Identification as a repeat finding: No. Recommendation: We recommend management ensure semi-annual certifications are completed for all employees charged to the grant awards at 100%. We recommend management establish a documented review by management of semi-annual certifications to ensure time charged to grant awards is allowable and allocable based on work performed in accordance with grant requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listing Number: 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Material Noncompliance, Qualified Opinion Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 29 CFR 5.5 states in part: (1) Minimum wages. (i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics… (3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). 2 CFR 200 Appendix II states in part: In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week.. . .” Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation did not obtain the weekly payroll reports certifications from a company that performed renovations to replace HVAC equipment and install windows in the building. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements. The amount disbursed and reported on the SEFA during the audit period is $696,118 and the labor portion was not determinable by the School Corporation. Identification as a repeat finding: No. Recommendation: We recommend the School Corporation implement a formal process to ensure the required weekly payroll reports certifications are collected and reviewed for projects requiring labor installation and funded by federal grants subject to Davis-Bacon wage rate requirements to ensure compliance with federal regulations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Federal Agency: US Department of Education (ED) Program Name: Student Financial Assistance Cluster: Federal Direct Student Loans, Federal Pell Grant Program ALNs: 84.268; 84.063 Award Numbers: P268K171370, P063P161370; Federal Awards Year 2024 – 2025 Questioned Costs: None Repeat Finding: Yes 2025-003. Finding: Errors in Reporting for NSLDS Northern Illinois University (University) did not properly report enrollment changes for certain students who received federal student aid to the National Student Loan Data System (NSLDS) and the internal controls in place did not prevent and detect errors. Condition: We noted 2 (5%) of 40 students tested in which the University did not report the correct enrollment status to the NSLDS at the Program Level. The sample was not intended to be, and was not, a statistically valid sample. Criteria: The Code of Federal Regulations (34 CFR 685.309) requires enrollment status changes for students to be reported to NSLDS within 30 days or within 60 days if the student with the status change will be reported on a scheduled transmission within 60 days of the change in status. Regulations require the status to include an accurate effective date. According to the NSLDS Enrollment Reporting Guide, a student’s Program-Level enrollment status should be reported with the same enrollment status as that student’s campus-level enrollment status for all programs the student is enrolled in at that location, even if the student is not currently taking coursework that applies to a particular program. If the student has withdrawn or graduated from an academic program, a “terminal enrollment status” of ‘W’ or ‘G,’ as appropriate, should be reported for that program, even if the student is still taking coursework applicable to other programs in which the student is enrolled. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure enrollment reporting is completed properly. Cause: University officials indicated the two exceptions were the result of manual processing errors. Specifically, Program-Level enrollment status updates were not completed for two students who unofficially withdrew. Effect: If the NSLDS is not properly updated with the student information by the University, overawards could occur should the student transfer to another institution and the student may not properly enter the repayment period. (Finding Code No. 2025-003, 2024-003) Recommendation: We recommend the University review current processes for reporting to NSLDS and implement procedures to ensure submissions are reported timely and accurately. University Response: Accepted. The University acknowledges the importance of accurate and timely enrollment reporting to the National Student Loan Data System (NSLDS). As it relates to the prior year finding and repeat finding status, the University corrected the system configuration issue and provided additional training regarding effective date reporting requirements. The exceptions identified in the current year were unrelated to the prior system logic issue and instead resulted from manual processing errors involving Program-Level updates for unofficial withdrawals. The University will review and strengthen its current enrollment reporting procedures to ensure Program-Level updates are completed consistently, particularly in cases involving unofficial withdrawals. The University will develop a batch reporting process for unofficial withdrawals to facilitate accurate enrollment reporting at both the program and campus level. Additional verification steps will be implemented prior to submission to confirm that both campus-level and program-level enrollment statuses are properly updated. The University will also reinforce staff training related to NSLDS reporting requirements and enhance supervisory review procedures to reduce the risk of similar errors occurring in the future.

Federal Agency: US Department of Education (ED) Program Names: Fund for the Improvement of Postsecondary Education; Special Education – Personnel Development to Improve Services and Results for Children with Disabilities; Child Care Access Means Parent in Schools ALNs: 84.116; 84.325K; 84.335 Award Numbers: P116Z230260; H325K180006; P335A220131; Federal Awards Year 2024 - 2025 Questioned Costs: None Repeat Finding: Yes 2025-004. Finding: Internal Controls Over Procurement Northern Illinois University (University) included incorrect documentation within purchase requisition forms for small purchases and simplified acquisition procurement transactions at the time of approval of the purchase which did not allow a reviewer to determine the appropriateness of the procurement method. Condition: Three (100%) of three small purchase procurement transactions tested in the Fund for the Improvement of Postsecondary Education program were approved based on a form that summarized the incorrect procurement method. The University incorrectly indicated on a small purchase waiver form that the transactions were exempt from procurement under the Illinois Procurement Code (30 ILCS 500 / 1-13(b)(8)). One (100%) of one transaction tested meeting the simplified acquisition threshold in the Fund for the Improvement of Postsecondary Education program was approved based on a form that summarized the incorrect procurement method. The University incorrectly utilized a small purchase waiver form to indicate that the transaction was exempt from procurement under the Illinois Procurement Code (30 ILCS 500 / 1-13(b)(8)). One (50%) of two small purchase procurement transactions tested in the Special Education – Personnel Development to Improve Services and Results for Children with Disabilities program was approved based on a form that summarized the incorrect procurement method. The University incorrectly indicated on a small purchase waiver form that the transaction was exempt from procurement under the Illinois Procurement Code (30 ILCS 500 / 1-13(b)(8)). One (50%) of two small purchase procurement transactions tested in the Child Care Access Means Parents in School program was approved based on a form that summarized the incorrect procurement method. The University incorrectly indicated on a small purchase waiver form that the transaction was exempt from procurement under the Illinois Procurement Code (30 ILCS 500 / 1-13(b)(8)). One (100%) of one transaction tested meeting the simplified acquisition threshold in the Child Care Access Means Parents in School program was approved based on a form that summarized the incorrect procurement method. The University incorrectly indicated on a small purchase waiver form that the transaction was exempt from procurement under the Illinois Procurement Code (30 ILCS 500 / 1-13(b)(8)). Based on additional information provided to us during our testing, the University did have other documentation to support the history of the procurement, including rationale for the method of procurement, and there were no indications that procurement methods used were inappropriate. The sample was not intended to be, and was not, a statistically valid sample. Criteria: Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure procurement procedures are properly followed and support is properly maintained as required by 2 CFR 200.318. Cause: University officials stated that insufficient training on procurements subject to 2 CFR 200 lead to the incorrect documentation on the purchase requisition documentation. Effect: If the purchase requisition forms contain an incorrect rationale for the procurement method selected, the University could approve payments of federal funds to vendors that do not meet federal regulations. (Finding Code No. 2025-004, 2024-004) Recommendation: We recommend the University review current processes for small purchases and simplified acquisition transactions to ensure purchase requisition forms are completed correctly. University Response: Accepted. The University implemented revised procedures and targeted training in April 2025 to strengthen compliance with the 2 CFR 200 procurement requirements. The transactions identified in the condition occurred prior to full implementation and corrective action. The University will continue to monitor procurement processes to ensure accurate and complete documentation of the procurement method selected.

Federal Agency: US Department of Education (ED) Program Name: Student Financial Assistance Cluster: Federal Pell Grant Program ALN: 84.063 Award Numbers: P063P161370; Federal Awards Year 2024 – 2025 Questioned Costs: None Repeat Finding: No 2025-005. Finding: Errors in Verification Reporting Northern Illinois University (University) did not properly code the verification status in the Common Origination and Disbursement (COD) System for students who were disbursed Pell Grant funds and later selected for verification, and the internal controls in place did not prevent and detect the exceptions. Condition: As part of verification requirements, the University is required to obtain acceptable documentation to verify the information required for the Verification Tracking Group to which the applicant is assigned; match information on the documentation to the student aid application; if necessary, submit data corrections to the Free Application for Federal Student Aid (FAFSA) Processing System and recalculate awards and; correctly code the student’s verification status in the COD System for Pell Grants. We noted 6 (24%) of 25 students tested who had been selected for verification for which the verification status code was not correctly coded in COD after the verification procedures were completed. The sample was not intended to be, and was not, a statistically valid sample. Criteria: Under 34 CFR 668.51 – 668.61, a school is required to complete the verification of information submitted by an applicant on the FAFSA if the application has been selected for verification. When a Pell Grant is disbursed, the school must report the student’s verification status through the COD System. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure verification status codes are properly reported. Cause: University officials stated that for students who were selected for verification after disbursements were made, the University’s existing procedures did not include a process to ensure verification status changes were properly updated and transmitted to the COD System after verification was completed. Effect: If the COD System is not properly updated with verification status by the University, there could be overpayments of student aid. (Finding Code No. 2025-005) Recommendation: We recommend the University review current processes for reporting verification status to the COD System and implement procedures to ensure all verification statuses are reported. University Response: Accepted. University procedures have been updated to ensure verification status updates are properly transmitted to the COD System upon completion of verification for students who were disbursed Pell Grant funds and were later selected for verification. Relevant staff have been trained in the revised procedures. Additionally, the University implemented a process to periodically review records and confirm that verification statuses are accurately reflected in the COD System. All affected student records have been reviewed. It has been confirmed in the National Student Loan Data System (NSLDS) that none of the reported statuses resulted in overpayment.

U.S. Departments and Pass-Through Programs with various assistance listings as listed in the Schedule of Expenditures for the Research and Development Cluster Cash Management Significant Deficiency in Internal Control over Compliance Grant Award Number: Potentially affects all grant awards under the Research and Development Cluster for DRI and UNLV on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Grantors require the submission of Requests for Reimbursement. Condition: There was no evidence of review and approval (segregation of duties) between the preparer and reviewer. In addition, indirect costs were unintentionally charged at a lower rate than approved. Cause: Desert Research Institute (DRI) and University of Nevada, Las Vegas (UNLV) did not have adequate internal controls to provide for the documented review and approval of Requests for Reimbursement submitted to the grantor. Effect: Inaccurate information may be reported to the grantor, and funds may not be drawn on a reimbursement basis or for immediate cash needs and not be detected. Questioned Costs: None Context/Sampling: A nonstatistical sample of 62 Requests for Reimbursement out of a population of 525 across the Nevada System of Higher Education was tested. The following errors were noted by institution: Desert Research Institute 11 requests were selected; nine had no evidence of review by an individual independent of the preparer. All nine requests were made prior to April 30, 2025, while the two requests with review and approval were performed in May 2025 and June 2025. University of Nevada, Las Vegas 17 requests were selected; one request applied an indirect cost rate lower than the approved rate, resulting in an under‑reimbursement of $256. Repeat Finding from Prior Year: Yes – prior year finding 2024-007. Recommendation: We recommend DRI and UNLV enhance internal controls to ensure Requests for Reimbursement are accurately prepared and include documented review and approval. Views of Responsible Officials: The Desert Research Institute agrees with this finding. The University of Nevada, Las Vegas agrees with this finding.

U.S. Department of Commerce Direct and Pass-through Nevadaworks as listed in the Schedule of Expenditures of Federal Awards Economic Development Cluster, 11.307 Reporting Significant Deficiency in Internal Control over Compliance Grant Award Number: Potentially affects all grant awards included under assistance listing 11.307 for WNC, UNLV, and TMCC on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients of certain federal awards to report subaward information. The pass-through entity requires the submission of Requests for Reimbursement. Condition: There was no evidence of review and approval (segregation of duties) between preparer and reviewer. Cause: The following institutions at the Nevada System of Higher Education did not have adequate internal controls to provide for the documented review and approval of reports submitted to the pass-through entity or federal agency: • Western Nevada College (WNC) • Truckee Meadows Community College (TMCC) • University of Nevada, Las Vegas (UNLV) Effect: Inaccurate information may be reported and not detected. Questioned Costs: None Context/Sampling: A nonstatistical sample of 14 Requests for Reimbursement out of a population of 96 across the Nevada System of Higher Education was selected for testing. The entire population of one subaward report required by FFATA submitted during the year was selected for testing. The following errors are noted by institution: Western Nevada College Four of the 14 Requests for Reimbursement were applicable to WNC. We noted that there was no evidence of review on one (the August 2024 submission) of the four Requests for Reimbursement that were tested. Truckee Meadows Community College Five of the 14 Requests for Reimbursement were applicable to TMCC. We noted that there was no evidence of review on one (January 2025 submission) of the five Requests for Reimbursement that were tested. University of Nevada, Las Vegas We noted there was no evidence of review for the one subaward report required by the FFATA. Repeat Finding from Prior Year: No Recommendation: We recommend the Nevada System of Higher Education institutions listed above enhance internal controls to provide for the documented review and approval of reports submitted to grantors. Views of Responsible Officials: The Western Nevada College agrees with this finding. The Truckee Meadows Community College agrees with this finding. The University of Nevada, Las Vegas agrees with this finding.

U.S. Department of the Interior BLM Fuels Management and Community Fire Assistance Program Activities, 15.228 Reporting Significant Deficiency in Internal Control over Compliance Grant Award Number: Affects grant award L24AC00252 included under assistance listing 15.228 as a direct award for UNR on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients of certain federal awards to report subaward information. Condition: There was no evidence of review and approval (segregation of duties) between the preparer and reviewer. Cause: The University of Nevada, Reno (UNR) did not have adequate internal controls to ensure the documented review and approval of subaward information required under the Federal Funding Accountability and Transparency Act (FFATA). Effect: Inaccurate information may be reported and not detected. Questioned Costs: None Context/Sampling: The entire population of one subaward report submitted during the year was selected for testing. We noted there was no evidence of review for the one subaward report required by the FFATA. Repeat Finding from Prior Year: No Recommendation: We recommend that UNR enhance internal controls to ensure the documented review and approval of subaward information required under FFATA. Views of Responsible Officials: The University of Nevada, Reno agrees with this finding.

U.S. Department of Treasury Pass-through the State of Nevada and others as listed in the Schedule of Expenditures of Federal Awards Coronavirus State and Local Fiscal Recovery Fund, 21.027 Reporting Material Weakness in Internal Control over Compliance Grant Award Number: Potentially affects all grant awards included under assistance listing 21.027 for UNLV and UNR as reported in the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The OMB Compliance Supplement provides that reporting requirements for subrecipients are as specified by the pass-through entity. The pass-through entities required the submission of Quarterly Progress Reports. Condition: There was no evidence of review and approval (segregation of duties) between the prepare and reviewer. Information reported to the pass‑through entity did not agree with the underlying supporting records. Cause: The following institutions of the Nevada System of Higher Education did not have adequate internal controls to provide for the documented review and approval of reports submitted to the pass-through entity: • University of Nevada, Reno (UNR) • University of Nevada, Las Vegas (UNLV) Effect: Inaccurate information was reported to the pass-through entity by UNLV and inaccurate information may be reported to the pass-through entity by UNR and not detected. Questioned Costs: None Context/Sampling: A nonstatistical sample of nine Quarterly Progress Reports out of a population of 54 across the Nevada System of Higher Education was selected for testing. Nevada System of Higher Education Schedule of Findings and Questioned Costs Year Ended June 30, 2025 The following errors were noted by institution: University of Nevada, Las Vegas Four of the nine Quarterly Progress Reports were applicable to UNLV. For all four reports sampled, there was no evidence of review and approval (segregation of duties) between the preparer and the reviewer.University of Nevada, Reno Four of the nine Quarterly Progress Reports were applicable to UNR. We noted there was no evidence of review for one of the four Quarterly Progress Reports. Repeat Finding from Prior Year: Yes – prior year finding 2024-014. Recommendation: We recommend UNR and UNLV enhance internal controls to provide for documented review and approval of reports submitted to the pass-through entities and ensure amounts are supported by underlying records. Views of Responsible Officials: The University of Nevada, Las Vegas agrees with this finding. The University of Nevada, Reno agrees with this finding.

U.S. Department of Education Pass-through the State of Nevada as listed in the Schedule of Expenditures of Federal Awards Career and Technical Education - Basic Grants to States, 84.048 Allowable Costs/Cost Principles Significant Deficiency in Internal Control over Compliance Grant Award Number: Potentially affects all grant awards included under assistance listing 84.048 for GBC as reported in the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: There was no evidence of review and approval (segregation of duties) of certain payroll expenditures charged to the grant. Cause: The Great Basin College (GBC) did not have adequate internal controls to provide for documented review and approval of payroll costs for terminated employees charged to the grant program. Effect: Inaccurate payroll expenses may be recorded to the federal grant and remain undetected. Questioned Costs: None Context/Sampling: A nonstatistical sample of 60 ($299,78) out of a population of 402 ($1,245,527) payroll expenditures across the Nevada System of Higher Education was selected for testing. GBC payroll expenditures were 15 ($115,473) of the 60 selected for testing. There were two payroll charges ($10,704) for one terminated employee that did not have evidence of review and approval. Repeat Finding from Prior Year: No Recommendation: We recommend GBC enhance internal controls to provide for documented review and approval for terminated employees charged to the grant program. Views of Responsible Officials: The Great Basin College agrees with this finding.

U.S. Department of Education Pass-through the State of Nevada as listed in the Schedule of Expenditures of Federal Awards Career and Technical Education - Basic Grants to States, 84.048 Cash Management Significant Deficiency in Internal Control over Compliance Grant Award Number: Potentially affects all grant awards included under assistance listing 84.048 for WNC as reported in the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Grantors require submission of Requests for Reimbursement. Condition: There was no evidence of review and approval (segregation of duties) between the preparer and reviewer. Cause: Western Nevada College (WNC) did not have adequate internal controls to provide for the documented review and approval of Requests for Reimbursement submitted to the pass-through entity. Effect: Funds may not be drawn on a reimbursement basis, for immediate cash needs, or an error may occur and not be detected. Questioned Costs: None Context/Sampling: A nonstatistical sample of 16 Requests for Reimbursement out of a population of 102 across the Nevada System of Higher Education was selected for testing. WNC had four Requests for Reimbursement selected for testing of the sample of 16. We noted there was no evidence of review by an individual independent of the preparer for one of the four requests. Repeat Finding from Prior Year: No Recommendation: We recommend WNC enhance internal controls to provide for the documented review and approval of Requests for Reimbursement. Views of Responsible Officials: The Western Nevada College agrees with this finding.

U.S. Department of Education Direct and pass through State of Nevada as listed in the Schedule of Expenditures of Federal Awards Gaining Early Awareness and Readiness for Undergraduate Programs, 84.334 Reporting Material Weakness in Internal Control over Compliance and Material Noncompliance Grant Award Number: Potentially affects all grant awards included under assistance listing 84.334 for CSN, GBC, NSU, TMCC, UNLV, UNR, and WNC, as reported in the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. US Department of Education requires the submission of Annual Performance Reports from direct recipients. The OMB Compliance Supplement provides that reporting requirements for subrecipients are as specified by the pass-through entity. The pass-through entities required the submission of Interim and Final Progress Reports. Condition: Information reported to the federal agency and the pass-through entity did not agree with the underlying supporting records. Cause: The following institutions at the Nevada System of Higher Education (NSHE) did not have adequate internal controls to ensure that amounts reported to the federal agency and pass-through entity were supported by underlying documentation: • College of Southern Nevada (CSN) • Great Basin College (GBC) • Nevada State University (NSU) • Truckee Meadows Community College (TMCC) • University of Nevada, Las Vegas (UNLV) • University of Nevada, Reno (UNR) • Western Nevada College (WNC) Effect: Inaccurate information was reported to the pass-through entity. Questioned Costs: None Context/Sampling: A nonstatistical sample of was selected across the Nevada System of Higher Education as follows: • Interim Progress Reports: Three sampled from a population of ten • Final Progress Reports: Three sampled from a population of ten • Direct Award Progress Reports: All reports out of a population of 3 tested Repeat Finding from Prior Year: No Recommendation: We recommend that the Nevada System of Higher Education institutions listed above enhance their internal controls to ensure that all reports submitted to pass‑through entities are subject to appropriate review and approval, and that all reported amounts are fully supported by the underlying records. Views of Responsible Officials: The College of Southern Nevada agrees with this finding. The Great Basin College agrees with this finding. The Nevada State University agrees with this finding. The Truckee Meadows Community College agrees with this finding. The University of Nevada, Las Vegas agrees with this finding. The University of Nevada, Reno agrees with this finding. The Western Nevada College agrees with this finding.

U.S. Department of Health and Human Services Direct and Pass-through State of Nevada and others as listed in the Schedule of Expenditures of Federal Awards Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 Reporting Significant Deficiency in Internal Control over Compliance Grant Award Number: Potentially affects all grant awards passed-through to UNR under assistance listing 93.243 on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal control that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients of certain federal awards to report subaward information. The OMB Compliance Supplement provides that reporting requirements for subrecipients are as specified by the pass-through entity. The pass-through entities required the submission of Quarterly Progress Reports. Condition: There was no evidence of review and approval (segregation of duties) between the preparer and the reviewer. Information reported to the pass-through entity did not agree to underlying supporting records. Cause: The University of Nevada, Reno (UNR) did not have adequate internal controls to provide for the documented review and approval of quarterly progress reports or subaward information required by the FFATA. In addition, UNR did not have adequate internal controls to ensure amounts reported to the pass-through entity were supported by the underlying records. Effect: Inaccurate information may be reported. Questioned Costs: None Context/Sampling: A nonstatistical sample of two Quarterly Progress Reports was selected from a population of five across the Nevada System of Higher Education. Repeat Finding from Prior Year: No Recommendation: We recommend the UNR enhance internal controls to provide for the documented review and approval of reports submitted to pass-through entities and subaward information required by the FFATA. Views of Responsible Officials: The University of Nevada, Reno agrees with this finding.

U.S. Department of Health and Human Services Pass-through the State of Nevada as listed in the Schedule of Expenditures of Federal Awards Epidemiology and Laboratory Capacity for Infectious Diseases, 93.323 Reporting Significant Deficiency in Internal Control over Compliance Grant Award Number: Potentially affects all grant awards included under assistance listing 93.323 for UNR on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 provides that non-federal entities must establish and maintain effective internal controls that provide 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. The OMB Compliance Supplement provides that reporting requirements for subrecipients are as specified by the pass-through entity. The pass-through entity requires the submission of Monthly Activity Reports. Condition: There was no evidence of review and approval (segregation of duties) between the preparer and reviewer. Cause: The University of Nevada, Reno (UNR) did not have adequate internal controls to provide for the documented review and approval of reports submitted to the pass-through entity. Effect: Inaccurate information may be reported to the pass-through entity and not be detected. Questioned Costs: None Context/Sampling: A nonstatistical sample of 6 Monthly Activity Reports was selected from a population of 36 at UNR were selected for testing. We noted there was no evidence of review on any of the 6 Monthly Activity Reports tested. Repeat Finding from Prior Year: No Recommendation: We recommend UNR enhance internal controls to provide for the documented review and approval of reports submitted to pass-through entities. Views of Responsible Officials: The University of Nevada, Reno agrees with this finding.

2 CFR § 400.1 gives regulatory effect for the U. S. Department of Agriculture to the Office of Management and Budget guidance in subparts A through F of 2 CFR part 200, as supplemented by this part, as USDA policies and procedures for uniform administrative requirements, cost principles, and audit requirement for Federal awards. 2 CFR § 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain effective internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 7 CFR § 210.7(c)(1) states, in part, to be entitled to reimbursement under this part, each school food authority shall ensure that the Claims for Reimbursement accurately reflects the number of lunches and meal supplements served to eligible children, and the school food authority shall, at a minimum: (iii) Base Claims for Reimbursement on lunch counts, taken daily at the point of service, which correctly identify the number of free, reduced price and paid lunches served to eligible children; (iv) Correctly record, consolidate and report those lunch and supplement counts on the Claim for Reimbursement; and (v) Ensure that Claims for Reimbursement do not request payment for any excess lunches produced, as prohibited in § 210.10(a)(2), or non-Program lunches (i.e., a la carte or adult lunches) or for more than one meal supplement per child per day. 7 CFR § 210.8(c) states the Claim for Reimbursement shall include data in sufficient detail to justify the reimbursement claimed and to enable the State agency to provide the Report of School Program Operations required under § 210.5(d) of this part. Such data shall include, at a minimum, the number of free, reduced price and paid lunches and meal supplements served to eligible children. The claim shall be signed by a school food authority official. Two out of ten (20%) site claim forms submitted by the District to the Ohio Department of Education and Workforce were inaccurate, since the District claimed more meals served than what was actually distributed. These errors occurred due to a weakness in internal controls, which failed to ensure site claim forms for reimbursable meals served at each building and submitted by the District to the Ohio Department of Education and Workforce were entered correctly. Failure to properly report the number of eligible meals resulted in the District claiming 985 fewer meals served than what was actually distributed and being under reimbursed in the amount of $2,599. The District should implement policies and procedures to help ensure that monthly site claim forms for all District buildings are reviewed and submitted to reflect actual counts for reimbursable meals served.

Federal Program: The Emergency Food Assistance Program (TEFAP) / Temporary Assistance for Needy Families (TANF) Assistance Listing (CFDA) Numbers: 10.187 and 93.558 Awarding Agency: U.S. Department of Agriculture / U.S. Department of Health and Human Services Pass-Through Entity: Ohio Association of Foodbanks (OAF) Compliance Requirement: Reporting Finding Type: Material Weakness in Compliance 2025-001 Inaccurate Federal Reporting Due to Insufficient Reconciliation Controls Criteria: Uniform Guidance (2 CFR §200.303 and §200.328) requires non-federal entities to establish and maintain effective internal control over federal awards and to ensure that required reports are accurate, complete, and supported by underlying accounting records. The OMB Compliance Supplement identifies Reporting as a direct and material compliance requirement. The Ohio Association of Foodbanks (OAF) prescribes specific data elements for monthly reporting, including counties served, member agencies, distribution activity, and service statistics. Condition: During testing of reporting compliance for major federal programs, we selected three of twelve monthly OAF reports submitted during the fiscal year. For each month tested, reported amounts did not reconcile to MOFC’s internal Poundage Distribution reports and Product Code – Agencies by County reports. Specifically, we identified material variances between the OAF reports and internal distribution records, including: - October 2024: ACP distributions were omitted from the OAF report, resulting in a variance of approximately 821,528 pounds (projected dollar impact of $262,889). - January 2025: VA/Holiday Purchase distributions were omitted from the OAF report, resulting in a variance of approximately 310,898 pounds (projected dollar impact of $155,449). - June 2025: Donated distributions, primarily Direct Retail Pickup (DRP) quantities, were omitted from the OAF report, resulting in a variance of approximately 933,505 pounds (projected dollar impact of $1,764,324). Additional differences were noted in purchased distributions at 40,399 pounds (projected dollar impact of $16,968. Although management provided explanations indicating that certain distributions were omitted in error or excluded due to differences in reporting scope, MOFC did not maintain documented reconciliations supporting the reported amounts. Evidence of review and approval demonstrating that differences were identified, investigated, and resolved prior to report submission was not provided. Cause of Condition: MOFC did not have formalized, documented reconciliation procedures to ensure that internal distribution reports were reconciled to amounts reported to OAF. In addition, management review controls over the preparation and approval of OAF reports were not sufficiently designed or documented to detect and prevent reporting errors prior to submission. Potential Effect of Condition: As a result, OAF reports submitted during the fiscal year were not fully supported by underlying records, increasing the risk of inaccurate reporting to the passthrough entity. This condition resulted in noncompliance with Uniform Guidance reporting requirements and may affect MOFC’s continued eligibility for federal funding. Based on the magnitude and frequency of the variances identified, this condition represents a material weakness in compliance for the reporting compliance requirement. Context: The materiality thresholds for assessing material noncompliance for the major programs were $217,800 for TEFAP (CFDA 10.187) and $301,000 for TANF (CFDA 93.558). Questioned Costs: No questioned costs were identified for this finding, as the variances relate to reporting accuracy rather than unsupported or ineligible expenditures. Recommendation: We recommend that MOFC implement formal, documented reconciliation procedures between internal distribution reports and the OAF report. Such procedures should include: 1. Preparation of a detailed supporting schedule used in compiling OAF reports 2. Documentation of reconciling items and explanations for differences between internal reports and amounts reported to OAF 3. Evidence of management review and approval prior to report submission Views of Responsible Officials and Planned Corrective Action: MOFC management acknowledged the reporting differences and stated that certain variances resulted from omitted distributions and differences in reporting scope. Management indicated plans to enhance internal review procedures and improve documentation supporting the preparation and submission of OAF reports.

Program: Coronavirus State and Local Fiscal Recovery Funds Federal Financial Assistance Listing No.: 21.027 Federal Agency: U.S. Department of Treasury Passed-through: California Department of Finance Award Number and Year: CSLFRF, 2022 Compliance Requirement: Procurement, Suspension, and Debarment Type of Finding: Material Weakness in Internal Control over Compliance, Instances of Noncompliance Criteria: Per 2 CFR part 200, subpart D, section 200.303, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award is compliance with federal statues, regulations, and the terms and conditions of the federal award. Prior to entering into subawards and contracts with award funds, recipients must verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded pursuant to 31 CFR section 19.300. Condition: We identified that the City’s purchasing and contracting policy in effect during fiscal year 2025 does not require the verification of the debarment and suspension status of vendors prior to entering into agreements. We also noted that the City did not maintain documentation that they verified that the contractor was not suspended or debarred prior to entering into a covered transaction. Cause: The City’s policy does not require the verification of the debarment and suspension of a vendor prior to entering into a covered transaction, nor does it address on what type of documentation should be maintained to ensure they are not suspended and debarred. Effect: Noncompliance with these requirements could result in disbursements of Federal funds to suspended and debarred parties. Questioned Costs: None reported. Context/Sampling: We selected 3 out of 10 of the City’s procurement transactions associated with the program. Repeat Finding from Prior Year(s): Yes. Recommendation: We recommend that the City include policies and procedures within their procurement policy to check whether or not vendors are suspended and debarred and to maintain that documentation within the procurement file. Views of Responsible Officials: Management agrees with the finding. See separate corrective action plan.

Program: Coronavirus State and Local Fiscal Recovery Funds Federal Financial Assistance Listing No.: 21.027 Federal Agency: U.S. Department of Treasury Passed-through: California Department of Finance Award Number and Year: CSLFRF, 2022 Compliance Requirement: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) requires that the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: We noted that the supporting documentation provided did not have evidence of segregation of duties for the preparation and approval of the submitted report. Cause: The City’s internal control environment was impacted by a shortage of staff necessary to fully conduct the program. Effect: The City’s reports on the awards did not have segregation of duties between the preparer and reviewer of the reports. Questioned Costs: None reported. Context/Sampling: We selected 100% of the City’s reports for the program. Repeat Finding from Prior Year(s): Yes. Recommendation: We recommend that the City continue to strengthen its policies and procedures over reporting to ensure that there is segregation of duties between the preparer and reviewer of reports. Views of Responsible Officials: Management agrees with the finding. See separate corrective action plan.

Assistance listing number: 21.027 Program name: Coronavirus State and Local Fiscal Recovery Funds Pass-through entity: State of Michigan EGLE Project numbers: A7588-01 and A5817-01 Finding type: Material weakness and material noncompliance with laws and regulations Repeat finding: No Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires non-federal entities to maintain specific written policies to ensure accountability for federal awards. Minimum mandatory policies include procurement procedures, allowability of costs, conflict of interest, cash management, and internal controls. Conditions: The City did not have written policies, as are required by Uniform Guidance, that adhered fully to the requirements of Uniform Guidance. Questioned Costs: None Why Questioned Costs Not Determinable: N/A How Questioned Computed: N/A Context: The City has some written policies or resolutions that address procurement and conflict of interest. The procurement policy, however, did not fully address the requirements of UG Section 200.318. In addition, the City had developed some procedures for cash management, allowability costs and internal control but did not adopt the written policies for cash management, allowability of costs and internal control that would fully address the requirements of UG Sections 200.305, 200.302, 200.400 and 200.303. Cause: The City was not in compliance with the UG requirements to have the correct written policies related to procurement, cash management, allowability costs and internal control. Effect: The absence of those properly prepared written policies increases the potential for further noncompliance because the City’s procedures may not adequately address the relevant compliance requirements. Recommendation: We recommend that the City create and put in place the written policies that address the requirements of 2 CFR 200.318-Procurement, 200.305-Cash Management, 200.302 & 200.400-Allowability of Costs, 200.303-Internal Control. View and Response of Responsible Officials: The City is reviewing existing documents and the requirements of UG for written policies to determine the best course of action to create and put in place the written policies required by UG.

Information on the federal program: Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY23-24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the eligibility compliance requirement. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with eligibility requirements. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of documentation to support eligibility determination could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: During the testing of internal controls and compliance over eligibility determinations for free and reduced meals, we selected a sample of 15 applications and 45 direct certifications for testing. For 3 of the 15 applications, the School Corporation was not able to provide any documentation to support the eligibility determination due to turnover in the food service director position. Therefore, we were unable to determine whether the School Corporation complied with the eligibility requirements. The internal control and noncompliance was isolated to fiscal year 2024. Identification as a repeat finding, if applicable: No Recommendation: We recommend that the School Corporation’s management establish an internal control process to maintain all applications and documentation to support eligibility determinations. Views of Responsible Officials and Planned Corrective Actions: Management has agreed with the finding and prepared a corrective action plan.

Information on the federal program: Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking 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." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the Child Nutrition Program and Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For one of the two small purchase method procurements sampled for testing, we noted that the School Corporation did not obtain quotes from an adequate number of qualified sources. The sample item amount disbursed was $67,000 in fiscal year 2024 for food service equipment maintenance. The School Corporation also did not properly perform a suspension and debarment check on the vendor. This finding is isolated to fiscal year 2024. There were no purchases in 2025 that required a simplified acquisition or small purchase procurement other than those procured by the food service cooperative. Identification as a repeat finding, if applicable: No Recommendation: We recommend the School Corporation's management establish a system of internal controls related to ensure that the School Corporation’s procurement policy is adhered to and quotes are obtained from an adequate number of qualified sources as required for small purchase method procurements. We also recommend management perform a suspension and debarment check or have the vendor attest they are not suspended or debarred prior to entering into transactions that individually or the in aggregate exceed $25,000 and are charged to a fund that receipts federal funds. Views of Responsible Officials and Planned Corrective Actions: Management has agreed with the finding and prepared a corrective action plan.

Information on the federal program: Subject: Special Education Cluster (IDEA) – Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-047-PN01, 22611-047-ARP, 22619-047-ARP, 24611-047-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 34 CFR 300.202(a) states: "General. Amounts provided to the LEA under Part B of the Act – (1) Must be expended in accordance with the applicable provisions of this part; (2) Must be used only to pay the excess costs of providing special education and related services to children with disabilities, consistent with paragraph (b) of this section; and (3) Must be used to supplement State, local, and other Federal funds and not to supplant those funds." 34 CFR 300.208 states: "(a) Uses. Notwithstanding §§ 300.202, 300.203(b), and 300.162(b), funds provided to an LEA under Part B of the Act may be used for the following activities: (1) Services and aids that also benefit nondisabled children. For the costs of special education and related services, and supplementary aids and services, provided in a regular class or other education-related setting to a child with a disability in accordance with the IEP of the child, even if one or more nondisabled children benefit from these services. (2) Early intervening services. To develop and implement coordinated, early intervening educational services in accordance with § 300.226. (3) High cost special education and related services. To establish and implement cost or risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in a consortium of which the LEA is a part, to pay for high cost special education and related services. (b) Administrative case management. An LEA may use funds received under Part B of the Act to purchase appropriate technology for recordkeeping, data collection, and related case management activities of teachers and related services personnel providing services described in the IEP of children with disabilities, that is needed for the implementation of those case management activities." 34 CFR 300.800 states: "The Secretary provides grants under section 619 of the Act to assist States to provide special education and related services in accordance with Part B of the Act – (a) To children with disabilities aged three through five years; and (b) At a State's discretion, to two-year-old children with disabilities who will turn three during the school year." 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. . 511 IAC 7-34-9 states in part: “(a) The public agency must hold title to and exercise continuing administrative control of all: (1) property; (2) equipment; and (3) supplies; the public agency acquires with Part B funds for the benefit of nonpublic school students with disabilities. (b) The public agency may place equipment and supplies in a nonpublic school for the period of time needed to provide special education and related services. The public agency must ensure that the equipment and supplies: (1) are used only for the provision of special education and related services; and (2) can be removed from the nonpublic school without remodeling the nonpublic school facility.” Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the Special Education Cluster program and Activities Allowed or Unallowed and Allowable Costs compliance requirements. Cause: Management was not aware that non-public school officials have no authority to obligate or receive federal funds and that School Corporation must maintain control of all Special Education funds, property, equipment and supplies; therefore, reimbursements were made to a non-public school for proportionate share expenditures. Effect: The payment of proportionate share expenditures to a non-public school resulted in the potential misuse of funds that were meant to pay the excess costs of providing special education to students. The unallowable nature of these expenditures may also result in the School Corporation not meeting their requirements related to Non-Public Proportionate Share for the respective grants. Questioned Costs: There were questioned costs identified in the amount of $17,857. Context: During fiscal year 2023-2024, the School Corporation was a member of Cooperative School Services (Cooperative). The Cooperative operated the special education programs and spent the federal money on behalf of its member schools. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. For costs related to non-public schools, the practice of the Cooperative was to separate out the required amount for each member school from the Cooperative budget, and the member schools would work with the non-public schools to determine how to spend their proportionate share amount. Each member school would then request reimbursement from the Cooperative for non-public school expenditures incurred. This allowed both the Cooperative and member schools to maintain control of all Special Education funds, property, equipment and supplies. In the initial sample of 25 expenditures, there was no noncompliance identified. However, while performing a review of separate transactions for the Period of Performance compliance requirement, it was noted that non-public schools received direct reimbursements from the Cooperative for their proportionate share expenditures, which is not allowable under the grant award. The audit team reviewed the expenditure population in entirety and identified a total of 5 expenditures, totaling $17,857, that were made from Special Education funds directly to non-public schools by the cooperative during the audit period. The lack of controls and noncompliance was an isolated to the 22611-047-PN01, 22611-047-ARP, 22619-047-ARP and 24611-047-PN01 grant awards. This issue was isolated to fiscal year 2024. No direct payments to non-public schools were identified during fiscal year 2025. Identification as a repeat finding, if applicable: No Recommendation: We recommended that the School Corporation's management establish a system of internal controls to ensure that no direct reimbursements are made to the non-public schools and to ensure compliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management has agreed with the finding and prepared a corrective action plan.

Information on the federal program: Subject: Special Education Cluster (IDEA) – Period of Performance Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-047-PN01, 22611-047-ARP, 22619-047-PN01, 22619-047-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Period of Performance Audit Finding: Material Weakness Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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 200.309 states: “A non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance (except as described in §200.461 Publication and printing costs) and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity.” 34 CFR 76.707 states in part: “….If the obligation is for – a) Acquisition of real or personal property…. The obligation is made – On the date on which the State or subgrantee makes a binding written commitment to acquire the property.” Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the Special Education Cluster program and Period of Performance compliance requirements. Cause: Management had established an initial obligation date that occurred in September of the second fiscal year but modified the final vendor for payment. The new obligation occurred after the period in which the School Corporation was allowed to incur the expense. Effect: If funds are not obligated by the end of the specified date, the grantor agency is not obligated to reimburse the School Corporation for costs incurred. This may indicate that the funding reimbursed that was incurred outside of the period of performance will need to be repaid to the grantor agency, and the School Corporation will then need to support the costs with non-federal funding. Questioned Costs: There were no questioned costs identified. Context: During fiscal year 2023-24, the School Corporation was a member of Cooperative School Services (Cooperative). The Cooperative operated the special education programs and spent the federal money on behalf of its member schools. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. For Special Education Cluster awards, funds must be obligated during the 27 months, extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following fiscal year. When testing transactions occurred in the liquidation period for the 22611-047-PN01, 22611-047-ARP, 22619-047-PN01 and 22619-047-ARP grant awards, two exceptions were identified in the sample of five transactions. For the above listed awards, costs must be obligated by September 30, 2023. For the two identified exceptions, an initial purchase order was made in September, but the ultimate transaction was paid to a separate vendor than the original purchase order, and this obligation was incurred in November 2023. This issue was isolated to fiscal year 2024. No costs incurred outside of the period of performance were identified in fiscal year 2025. Identification as a repeat finding, if applicable: No Recommendation: We recommended that the School Corporation's management establish a system of internal controls to ensure that no costs are incurred after the September 30 deadline and to ensure compliance with the grant agreement and the Period of Performance compliance requirement. Views of Responsible Officials and Planned Corrective Actions: Management has agreed with the finding and prepared a corrective action plan.

Information on the federal program: Subject: Special Education Cluster (IDEA) –Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-047-PN01, 22611-047-ARP, 23611-047-PN01, 22619-047-PN01, 22619-047-ARP, 23619-047-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, and Earmarking Audit Finding: Significant Deficiency, Other Matters Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).... 2 CFR 200.207(a) states in part: "The Federal awarding agency or pass-through entity may impose additional specific award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools and facilities, must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools or facilities within its boundaries, is to the total number of students with disabilities of the same age range." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the earmarking portion of the Matching, Level of Effort, Earmarking compliance requirement. Cause: The School Corporation participates in a Special Education Cooperative that manages and operates the special education program and oversees the majority of the federal compliance requirements. The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Effect: The failure to establish an effective internal control system placed the School Corporation in noncompliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Noncompliance with the grant agreement or the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: $34,365 Context: The School Corporation did not meet the earmarking requirements for the grants, which concluded during the audit period. Both the Special Education Grants to States and Special Education Preschool Grants required a proportionate share of their funding to be spent on non-public school students with disabilities. The 22611-047-PN01, 22611-047-ARP, 23611-047-PN01, 22619-047-PN01, 22619-047- ARP, and 23619-047-PN01 grant awards were fully expended during the audit period with minimum Non- Public Proportionate Share earmarking requirements of $27,189, $5,074, $26,124, $1,171, $453, and $1,929, respectively. There were not sufficient non-public school expenditures incurred to meet the non-public proportionate share requirement for any of the six grants. The non-public school expenditures fell short of the minimum requirement by $11,679, $3,176, $16,405, $1,171, $4, and $1,929, respectively. Identification as a repeat finding: Yes – see Finding 2023-002. Recommendation: We recommended that the School Corporation's management establish internal controls to monitor earmarking requirements periodically to ensure compliance with the earmarking compliance requirements by the end of the grant period. This includes meeting with the Cooperative periodically to monitor and track progress towards meeting the earmarking requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Federal Agency: U.S. Department of Education Assistance Listing Number: 84.007; 84.063; 84.268 Cluster Name: Student Financial Assistance Cluster Program Names: Federal Supplemental Education Opportunity Grants; Federal Pell Grant Program; Federal Direct Student Loans Award Numbers: N/A; Federal Award Year 2024-2025 Questioned Cost: None Program Expenditures: $768,137; $45,573,205; $87,147,867 Cluster Expenditures: $137,694,385 The Illinois State University (University) did not accurately report student enrollment information to the U.S. Department of Education’s National Student Loan Data System (NSLDS) and internal controls in place did not identify the errors. Condition Out of twenty-five students tested, we noted fourteen students’ (56%) enrollment status changes had discrepancies in Enrollment Effective Dates between the NSLDS Campus-Level Record and the NSLDS Program-Level Record, with the NSLDS Program-Level Record dates being inaccurate by 17 days. The sample was not intended to be, and was not, a statistically valid sample. Criteria According to the NSLDS Enrollment Reporting Guide, a student’s Program-Level enrollment status should be reported with the same enrollment status as student’s Campus-Level enrollment status for all programs the student is enrolled in at a location, even if the student is not currently taking coursework which applies to a particular program. If the student has withdrawn or graduated from an academic program, a “terminal enrollment status” of ‘W’ or ‘G,’ as appropriate, should be reported for the program, even if the student is still taking coursework applicable to other programs in which the student is enrolled. The NSLDS Enrollment Reporting Guide also states the University is responsible for accurately reporting all Program-Level Record and Campus-Level Record data elements. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving federal awards to establish and maintain internal controls designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. Effective internal controls should include procedures to ensure accurate student enrollment information is submitted to NSLDS. Cause University management indicated the failure to report accurate enrollment information was due to a technical error in the University’s process to transfer data to NSLDS. Effect Failure to accurately report Campus-Level student enrollment information to NSLDS resulted in noncompliance with federal guidelines and inaccurate NSLDS records. (Finding Code No. 2025-004) Recommendation We recommend the University review current processes for reporting to NSLDS and implement procedures to ensure student enrollment information is reported accurately. University Response The University acknowledges the above finding. The identified issue was isolated and only impacted fall graduates. This issue was fully addressed when the university filed its fall 2025 enrollment reporting. The university has conducted an internal audit to identify students that were reported incorrectly and has manually updated files to ensure dates were properly reflected. At current state, internal monitoring and manual edits are made if discrepancies appear. It is expected that the Enterprise Resource Planning System will launch an automatic fix for this issue in a software update for all users in the first quarter of calendar year 2026. Should the software issue not result in an automation of the fix, the University plans to continue the manual edits, then customize the NSLDS reporting logic to ensure continued future alignment.

FINDING 2025-003 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Number and Year (or Other Identifying Number): SY24/SY25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. Condition and Context An effective internal control system, which would include segregation of duties, was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Eligibility compliance requirement. Any child enrolled in a participating school, who meets the applicable program's definition of "child," may receive meals under applicable programs. A child belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children that have been determined ineligible for free or reduced-price meals pay the full price for their meals. A child's eligibility for free and reduced-priced meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnished such information as family income and family size. The School Corporation determines eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Annual eligibility determinations may also be based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program, or, under most circumstances, the TANF program. A household may furnish documentation of its participation in one of those programs, or the School Corporation may obtain the information directly from the State or local agency that administers those 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. One employee downloaded the Direct Certification reports from the state and updated the free or reduced status of those students into the software system without a documented oversight or review process in place to ensure direct certified students were properly processed. The lack of internal controls was systemic throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 17 BORDEN-HENRYVILLE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause The School Corporation's management had not developed an oversight or review process to ensure that the Direct Certification report was properly processed. Effect The failure to design or implement a system of internal controls places the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. Noncompliance could result in students either receiving benefits they were not entitled to or not receiving benefits they would otherwise be entitled to. 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 regarding the processing of direct certifications into the software system. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-004 Subject: Child Nutrition Cluster - Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Number and Year (or Other Identifying Number): SY25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment 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 related to the Procurement and Suspension and Debarment compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 18 BORDEN-HENRYVILLE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 nonprocurement 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. Most large purchases for food and supplies are made through contracts entered into by a purchasing cooperative that the School Corporation belongs to. Those transactions were tested at the cooperative level, and no noncompliance or lack of internal controls were noted. It is the School Corporation's policy that it will either require a certification from the vendor or check the exclusion list prior to entering a covered transaction. The School Corporation only entered into one covered transaction at the School Corporation level. It was unable to provide evidence that it followed its policy for ensuring that the vendor was not suspended or debarred prior to making a series of purchases that totaled $53,414. The lack of internal controls and noncompliance was only noted in the second year of 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 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: INDIANA STATE BOARD OF ACCOUNTS 19 BORDEN-HENRYVILLE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The School Corporation's management failed to properly design and implement an internal control system that would have ensured that its policy over the Procurement and Suspension and Debarment compliance requirement was adhered to during the audit period. Effect The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could have resulted in the loss of federal funds to the School Corporation. Additionally, the School Corporation could have made payments to a vendor that was suspended or debarred. Payments to such vendors are unallowable. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. The system should be designed to ensure that vendors are not suspended or debarred, or otherwise excluded, prior to the School Corporation entering into a covered transaction. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-005 Subject: Special Education Cluster (IDEA) - Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-167-PN01, 23611-167-PN01, 24611-167-PN01, 25611-167-PN01, 22611-167-ARP, 22619-167-PN01, 22619-167-ARP, 23619-167-PN01, 24619-167-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 20 BORDEN-HENRYVILLE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation had not properly designed and 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 Procurement and Suspension and Debarment compliance requirement. 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 nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAM exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Upon inquiry of the School Corporation, it was determined that the School Corporation had not established internal controls to ensure that its suspension and debarment policy was being followed. A population of seven covered transactions for goods or services that equaled or exceeded $25,000 paid from special education grant funds during the audit period was identified. A sample of four transactions, totaling $254,887, was selected for testing. For three of the four transactions, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. The lack of effective 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 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 INDIANA STATE BOARD OF ACCOUNTS 21 BORDEN-HENRYVILLE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The School Corporation's management failed to properly design and implement an internal control system that would have ensured that its policy over the Procurement and Suspension and Debarment compliance requirement was adhered to during the audit period. 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 were equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. 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 management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Department of Aging Office of the Budget - Office of Comptroller Operations Finding 2025 – 005: ALN 93.044, 93.045, and 93.053 – Aging Cluster (including COVID-19) A Material Weakness and Material Noncompliance Exist in the Department of Aging’s Program Income and Reporting Process Federal Grant Number(s) and Year(s): 2101PACMC6 (4/01/2021 – 9/30/2024), 2101PAHDC6 (4/01/2021 – 9/30/2024), 2101PASSC6 (4/01/2021 – 9/30/2024), 2201PASTPH (1/01/2022 – 9/30/2025), 2301PAOACM (10/01/2022 – 9/30/2025), 2301PAOAHD (10/01/2022 – 9/30/2025), 2301PAOASS (10/01/2022 – 9/30/2025), 2401PAOACM (10/01/2023 – 9/30/2025), 2401PAOAHD (10/01/2023 – 9/30/2025), 2401PAOASS (10/01/2023 – 9/30/2025), 2501PAOACM (10/01/2024 – 9/30/2026), 2501PAOAHD (10/01/2024 – 9/30/2026), 2501PAOASS (10/01/2024 – 9/30/2026) Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Compliance Requirement: Program Income, Reporting Condition: The Pennsylvania Department of Aging (PDOA) is required to submit a SF-425, Federal Financial Report to the United States Department of Health and Human Services (HHS) for the Aging Cluster of grants. The reports are due annually 90 days after the reporting period with a final submission due 120 days after the project period end date. The SF-425 report includes data related to federal cash receipts and disbursements, federal expenditures to date, the federal share of unliquidated obligations, the federal program income earned, the federal program income expended and unexpended, indirect charges to the grant, as well as other general information that is necessary to ensure compliance with program requirements. We selected two of 11 SF-425 reports submitted during the audit period for testing. Our testing disclosed that federal program income did not agree to supporting documentation and was incorrectly reported on the September 30, 2024 annual filing for the federal fiscal year (FFY) 2024 federal grant. Although the SF-425 report was certified by an authorized official, the overstatement of federal program income earned and expended went undetected by Commonwealth management until it was brought to their attention by the auditor. Our testing also disclosed that $2,983,034 of unexpended federal program income was reported on the September 30, 2024, final filing for the FFY 2021 federal grant. This amount agreed to supporting documentation; however, PDOA could not adequately explain what action was taken to ensure the balance was expended in the subsequent fiscal year, as required by federal regulations and Aging Program Directives. Our testing of federal program income included the review of cost sharing fees collected from services provided through Aging Cluster grants and PDOA provided reports from their accounting system used to track program income, but auditors were unable to determine the amount of federal cost sharing collections and if they were allowable. Criteria: The 2025 OMB Uniform Guidance Compliance Supplement, Part 4 – III. Compliance Requirements for Aging Cluster, L. Reporting states, in part: For State Agency- 1. Financial Reporting c. SF-425, Federal Financial Reports – Semi-Annual (OMB No. 4040-0014)- Applicable Finding 2025 – 005: (continued) 45 CFR Section 1321.9(c)(2)(xii), Use of program income, states: Program income is subject to the requirements in 2 CFR 200.307 and 45 CFR 75.307 and as follows: (A) Voluntary contributions and cost sharing payments are considered program income; (B) Program income collected must be used to expand a service funded under the Title III grant award pursuant to which the income was originally collected; (C) The State agency must use the addition alternative as set forth in 2 CFR 200.307(e)(2) and 45 CFR 75.307(e)(2) when reporting program income, and prior approval of the addition alternative from the Assistant Secretary for Aging is not required; (D) Program income must be expended or disbursed prior to requesting additional Federal funds; and (E) Program income may not be used to match grant awards funded by the Act without prior approval. 45 CFR Section 1321.9(c)(2)(xi), Cost Sharing states, in part: A State agency is permitted under section 315(a) of the Act (42 U.S.C. 3030c-2(a)), to implement cost sharing for services funded by the Act by recipients of the services, except as provided for in paragraph (c)(2)(xi)(D) of this section. (H) Collection of program income. All cost sharing contributions collected are considered program income and are subject to the requirements of 2 CFR 200.307, 45 CFR 75.307, and in § 1321.9(c)(2)(xii). 2 CFR Section 200.303(a), Internal controls, states: The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Aging Program Directive (APD) #25-01-03, Program Income, states in part: Federal Program Income - All program income generated from services funded, in whole or in part, by federal OAA funds on hand as of June 30, 2024, is to be budgeted and expended during SFY 2024-25… Failure to comply with these policies may result in the reduction of Block Grant funding to the AAA [Area Agency on Aging]… AAAs will comply with the provisions of APD #05-01-11 concerning excessive balances of program income collections. AAAs are advised that payments of funds on SFY 2024-25 Aging Block Grant contracts will be contingent upon the compliance of AAAs with the federal and state requirements for program income and cost sharing fund balances… Finding 2025 – 005: (continued) When a AAA has excessive balances of Federal Program Income, Local Program Income or OPTIONS Cost Sharing Funds as of June 30, 2024 (Fourth Quarter FRR), its SFY2024-25 Block Grant monthly payment(s)may be reduced or withheld until the AAA achieves compliance with the established program income balance requirements. Aging Program Directive #05-01-11, Area Agency on Aging (AAAs) Program Income Policies, states in part: Federal Program Income - All Federal program income generated from services funded, in whole or in part, by federal Older Americans Act funds that is on hand as of June 30 must be budgeted and expended during the following fiscal year. Failure to comply with this policy could result in the reduction of Block Grant funding to the AAA… The AAA must also ensure that appropriate financial records for program income are maintained by service provider. The purpose of such records is to ensure compliance with standards established by the Department of Aging, i.e. that program income collections are expended on a timely basis and no excessive balances for program income collections are accumulated. Records must be available that properly reflect beginning balances, receipts, expenditures and ending balances. In addition, Commonwealth Management Directive 325.12 Amended – Standards for Enterprise Risk Management in Commonwealth Agencies, adopted the internal control framework outlined in the United States Government Accountability Office’s Standards for Internal Control in the Federal Government (Green Book). The Green Book states in part: Management should design control activities to achieve objectives and respond to risk. Management should implement control activities through policies. Cause: PDOA stated that management turnover, outdated policies, inconsistencies and timing of AAA reporting contributed to the incorrect reporting of program income. In addition, the accounting system, used by the AAAs to report program income to PDOA, reports federal program income as a single figure, commingling the reporting of program income of the various grant awards. As a result, the liquidation of program income by grant award could not be determined to ensure it was fully spent in compliance with federal requirements. Also, the report does not differentiate between voluntary contributions or cost sharing fees to determine compliance with federal program income requirements specific to cost sharing fees. Effect: Since PDOA’s controls over reporting program income and the preparation process for the SF-425 report were not effective, program income was incorrectly reported on the SF-425 report submitted to HHS. In addition, PDOA was not in compliance with federal regulations and their Aging Program Directives related to program income requirements. Recommendation: We recommend that PDOA update their written policies and procedures to ensure federal program income is accurately recorded, reported and in compliance with federal regulations. Program income should be monitored and reconciled to ensure that the balance on hand is budgeted and expended in accordance with federal regulations and PDOA’s policies. PDOA policy should allow for consistent accounting and reporting amongst the AAAs. PDOA and the Office of Comptroller Operations (OCO) should also develop a policy for the review, approval, and submission of the SF-425 reports to ensure the reports are prepared accurately and submitted timely in accordance with federal regulations. Finding 2025 – 005: (continued) PDOA Response: PDOA agrees with this finding. OCO Response: OCO agrees with this finding. Questioned Costs: None

FINDING 2025-002 Subject: Title I Grants to Local Educational Agencies - Eligibility Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A230014, S010A240014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Findings: Material Weakness, Modified Opinion Condition and Context Eligibility for Title I is determined on the Eligible School Summary of the Tile I Application. Enrollment and Poverty numbers are automatically pulled from the Indiana Department of Education's (IDOE) Official Pupil Enrollment count for each school into the Eligible School Summary page of the Tile I application. The counts that are prepopulated should be based on the School Corporation's records as of October of the prior fiscal year. During the audit period, the School Corporation submitted two Title I Applications. The School Corporation was required to use the October 2022 Real Time Report data for the fiscal year 2023-2024 Title I application and the October 2023 Real Time Report data for the 2024-2025 Title I application submitted to the IDOE. Data to be submitted included student socioeconomic status information. Of the 25 students tested, the School Corporation could not provide documentation supporting enrollment status for 1 student or the socioeconomic status for 3 students. 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 200.334 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 annual, from the date of 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. . . ." INDIANA STATE BOARD OF ACCOUNTS 17 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 34 CFR 200.78(a)(1) states: "After reserving funds, as applicable, under § 200.77, including funds for equitable services for private school students, their teachers, and their families, an LEA must allocate funds under this subpart to school attendance areas and schools, identified as eligible and selected to participate under section 1113(a) or (b) of the ESEA, in rank order on the basis of the total number of public school children from low-income families in each area or school." Cause The School Corporation did not have effective internal controls in place to ensure documentation was complete for all student enrollment and socioeconomic statuses. 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 was not complete to ensure all student enrollment and socioeconomic statuses in the Title I Application were accurate. 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 ensure documentation is complete for all student enrollment and socioeconomic statuses. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-003 Subject: Title I Grants to Local Educational Agencies - Special Tests and Provisions - Assessment System Security Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A230014, S010A240014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Assessment System Security Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 18 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context State educational agencies (SEA), in consultation with local educational agencies (LEA), are required to establish and maintain an assessment security system that is valid, reliable, and consistent with relevant professional and technical standards. Within their assessment system, SEAs must have policies and procedures to maintain test security measures and ensure that LEAs implement those policies and procedures. As such, the Indiana Department of Education created and published the Indiana Assessments Policy Manual. As a part of the assessment security, any individual who administers, handles, or has access to secure test materials at the School Corporation shall complete assessment training and sign a testing security and integrity statement that remains on file in the appropriate building-level office each year. Everyone required to sign the testing integrity agreement shall sign the form by an established date. The School Corporation had a process to provide assessment system security training and to ensure each employee that attended training signed the agreement indicating training was received. However, the School Corporation had not established a process to ensure that all training documentation and signed statements remained on file in the appropriate building-level office each year. Due to the lack of internal controls over the retention of training documentation and signed statements, the School Corporation could not provide evidence that 4 of the 20 employees tested for fiscal year 2024-2025 had completed the assessment security training or had signed the assessment security agreement. The lack of internal controls and noncompliance were isolated to 2024-2025. 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 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 5-5-5(b) states: "Any individual who administers, handles, or has access to secure test materials at the school or school corporation shall complete assessment training and sign a testing security and integrity agreement to remain on file in the appropriate building-level office each year." Cause The School Corporation did not have effective internal controls in place to ensure certifications for assessment security training were properly maintained for 2024-2025. INDIANA STATE BOARD OF ACCOUNTS 19 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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, certifications were not properly maintained to ensure employees attended the assessment system training or signed the assessment security agreement for 2024-2025. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management design and implement a proper system of internal controls, including policies and procedures that would ensure certifications for assessment security training are properly maintained. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-004 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: COVID-19 - Special Education Grants to States, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027X, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-042-ARP, 22619-042-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation is a member of the Northeast Indiana Special Education Cooperative (Cooperative). During fiscal year 2023-2024, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the procurement and the suspension and debarment requirements. The Cooperative did not have adequate procedures in place to ensure that the requirements for the simplified acquisition threshold and for small purchases were met for each applicable procured good or service or to ensure that vendors were not suspended or debarred prior to entering into a covered transaction. INDIANA STATE BOARD OF ACCOUNTS 20 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Procurement When the value of the procurement for property or services exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a nonfederal entity, formal procurement methods are required. The SAT is typically set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold. Therefore, the SAT threshold is set at $150,000. Formal procurement methods require adherence to documented procedures and formal methods such as sealed bids or proposals. When the purchase value exceeds the micro-purchase threshold but is less than the simplified acquisition threshold, a small purchase occurs. Small purchases require documented, full and open competition or a documented rationale for limited competition. For 2023-2024, three vendors with disbursements totaling $175,125 were identified as being less than the simplified acquisition threshold of $150,000 but exceeding the $50,000 micropurchase threshold and were selected for testing. The Cooperative did not obtain price or rate quotes for two of the three vendors and there was no documentation detailing the history of the 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 nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAM exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the Cooperative 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 Cooperative disclosed there were not any documented internal controls or procedures. Nine covered transactions were identified. The covered transactions totaling $803,836 were selected for testing. The Cooperative did not verify the suspension and debarment status of the tested vendors prior to payment. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 21 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: . . . (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. . . . (2) Proposals. A procurement method in which either a fixed price or costreimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. . . ." 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." INDIANA STATE BOARD OF ACCOUNTS 22 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The Cooperative noted that the ARP portion of the special education grant was new for the 2023-2024 school year. The ARP funding gave opportunity for types of expenditures that do not typically get expensed using special education funding. The transactions noted within the Condition and Context were from the ARP portion of the grant, which provided property or services that exceeded the micropurchase threshold. Management of the Cooperative was unaware of the procurement requirements when property or services exceed the micro-purchase threshold. In addition, management of the Cooperative was unaware of the suspension and debarment requirements when a covered transaction is expected to equal or exceed $25,000. Effect Without the proper implementation of an effectively designed 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. Without following the required methods for procurement, the Cooperative could be overpaying for services. Unverified vendors to whom payments equal to or in excess of $25,000 could be suspended, debarred, or otherwise excluded. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Cooperative's management design and implement a system of internal controls related to procurement and suspension and debarment procedures to ensure procurement requirements are met and to ensure entities are neither suspended nor debarred, or otherwise excluded or disqualified, 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 2025-005 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 Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-004. INDIANA STATE BOARD OF ACCOUNTS 23 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation had not established an effective internal control system to ensure compliance with the grant agreement and the Equipment and Real Property Management compliance requirement. The School Corporation had not completed a capital asset inventory since June 30, 2023. Additionally, the School Corporation purchased the following items from the grant award during the audit period that exceeded its capitalization threshold, none of which were added to the capital asset ledger:  One 86" LifeTouchPro for $8,359  Three Tem Spec Units for $14,550  Five Tem Spec Units for $13,650 each  6,000' Fiber Cable for $46,330  900' Fiber Cable for $7,610  1,600' Fiber Cable for $23,853 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, and 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 sale price of the property. INDIANA STATE BOARD OF ACCOUNTS 24 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 The School Corporation did not have effective internal controls in place to ensure equipment was properly managed. 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, equipment was not properly managed and could lead to misuse of the grant award. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management design and implement a proper system of internal controls, including policies and procedures that would ensure equipment is properly managed for compliance with the grant agreement and the Equipment and Real Property Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-006 Subject: COVID-19 - Education Stabilization Fund - Earmarking 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: Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context Local educational agencies that receive funds under the American Rescue Plan - Elementary and Secondary School Emergency Relief Fund (ESSER III) are to reserve not less than 20 percent of the funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day, comprehensive afterschool programs, or extended school year programs, and ensure that such interventions respond to students' academic, social, and emotional needs and address the disproportionate impact of the coronavirus on the student subgroups. This requirement was set out in the enabling legislation for the funds and further implemented in the Education Stabilization Relief Fund Application III, which the School Corporation was required to complete for its award. INDIANA STATE BOARD OF ACCOUNTS 25 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation was responsible for monitoring each required set aside throughout the life of the grant to ensure the obligation was met; however, there was no oversight or review process in place to ensure monitoring of the required set aside. Additionally, the School Corporation could not provide documentation to show that the obligation was met, or not met, to address student learning loss due to the impact of COVID-19 in the School Corporation. The lack of internal controls and noncompliance were systemic 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). . . ." Section 2001(e)(1) of the ARP Act states in part: "A local educational agency that receives funds under this section— (1) shall reserve not less than 20 percent of such funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day, comprehensive afterschool programs, or extended school year programs, and ensure that such interventions respond to students' academic, social, and emotional needs and address the disproportionate impact of the coronavirus on the student subgroups . . ." Cause The School Corporation did not have effective internal controls in place to ensure documentation over the required set aside for learning loss was maintained and monitored. 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 was not provided to determine if the required set aside for learning loss was met and monitored. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 26 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 set aside for learning loss is documented and met in accordance with the grant agreement and the earmarking compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. INDIANA STATE BOARD OF ACCOUNTS 27

Material Weakness Material Noncompliance Program: Assistance Listing 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.02784.173– Special Education Cluster (IDEA) Assistance Listing: 84.425U– Elementary and Secondary School Emergency Relief Fund (ARP ESSER) Repeat Finding: Yes Criteria: 2 CFR 200.302 and 2 CFR 200.303 outline key requirements for non-federal entities managing federal awards. Section 200.302 mandates that a financial management system be in place to prepare reports as required by both general and program-specific terms and conditions. It also requires tracing funds to a level of expenditure that demonstrates compliance with federal statutes, regulations, and the terms of the federal award, including comparing expenditures with the budget for each federal award. Section 200.303 requires non-federal entities to establish and maintain effective internal controls over federal awards, ensuring reasonable assurance that the entity is managing the award in compliance with federal laws, regulations, and the award's terms and conditions. Condition: The District’s internal controls over budgeting for federal grants are insufficient to ensure compliance with federal regulations and to stay within the budgetary limits established by the federal awards, as specified in the Mississippi Comprehensive Automated Performance-based System (MCAPS), administered through the Mississippi Department of Education. Specifically, the District has not adequately adhered to budgeting restraints outlined for its federal grants. Our audit procedures identified the following instances where actual expenditures appear to exceed the budgeted amounts:  ESSER ARP III grant, totaling $204,010.20.  SPED Cluster - IDEA Part B grant, totaling $12,819.75.  Title I, Part A grant, totaling $10,224.19. Context/ Perspective: This finding is a result of our comparisons of budget items in the Mississippi Department of Education’ MCAPS system to actual amounts spent in major programs. This condition cited appears to be a systematic issue. Cause: The District did not properly monitor budget limits established in MCAPS to ensure that budgeting requirements were fulfilled. Effect: Failure to remain within established budget limits in MCAPS could affect future eligibility for federal award programs or result in a loss or misappropriation of public assets. Questioned Costs: $204,010.20 (ARP ESSER III) Recommendation: The District should establish additional internal controls to ensure that it remains within budget limits for each grant maintained in MCAPS. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.

FINDING 2025-001 Information on the federal program: Subject: Special Education Cluster (IDEA) – Internal Controls Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-046-PN01, 22611-046-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Earmarking Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 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." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and earmarking compliance requirement. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the earmarking requirements. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: The School Corporation is a member of the Porter County Education Services (Cooperative). During fiscal year 2023-2024, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. 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 22611-046-PN01and 22611-046-ARP grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The non-public proportionate share expenditures were determined by applying a percentage to the non-public school budgeted expenditures. As such, we were unable to identify if the minimum amount per each applicable member schools’ grant award was expended and properly reported to IDOE, as required. The lack of internal controls was isolated to the 22611-046-PN01 and 22611-046-ARP grant awards which were fully expended during fiscal year 2024. These two grant awards had minimum earmarking requirements for the Non-Public Proportionate Share of $35,513 and $8,472, respectively. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior finding number was 2023-003. Recommendation: We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to monitor the Cooperative and ensure non-public proportionate share funds are appropriately allocated to the member school based on expenditures charged directly on behalf of the member school. Supporting documentation for these expenditures should be retained for audit. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Federal Agency: US Department of Education Federal Program Name: Student Financial Assistance Cluster Assistance Listing Number: 84.007, 84.033, 84.063, 84.268 Federal Award Identification Number and Year: P007A243438 - 2025, P033A243438 - 2025, P063P242047 - 2025, P268K252047 - 2025 Award Period: July 1, 2024 to June 30, 2025 Type of Finding:  Compliance, Other Matter  Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. The Code of Federal Regulations, 34 CFR 685.309(b), states the school is required to report changes in the student’s enrollment status, the effective date of the status, and an anticipated completion date. Condition: The University did not properly report student enrollment changes for students who received federal student aid to the National Student Loan Data System (NSLDS). Questioned costs: N/A Context: During our testing of 40 students, we identified 2 students with effective dates reported to NSLDS that did not align with institutional records. Cause: The University didn't have proper procedures in place to verify students' status in NSLDS matched the institution’s records accurately. Effect: The University was not in compliance with the requirements to properly report student enrollment data correctly. Incorrect dates submitted to NSLDS may be used to determine the grace period for the repayment and interest of outstanding Title IV student loans. Repeat Finding: Yes, 2024-004 Recommendation: We recommend the University review current processes for reporting to NSLDS and implement procedures to ensure submissions are reported accurately. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.

Information on the federal program: Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listing Number: 84.425U Federal Award Numbers: S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 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)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency) 2 CFR 200 Appendix II states in part: In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week.. . .” Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirements. The School Corporation did not retain the construction contract document. Therefore, the audit team could not confirm that the contract contained the appropriate Davis-Bacon wage rate requirement clause. However, the School Corporation did collect weekly payroll data. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation expended $63,854 during the audit period on a construction project for the North Central High School Kitchen/Cafeteria remodel, which was charged to the ESSER III grant award (84.425U). The construction contract was not retained by the School to verify its inclusion of the Davis- Bacon clause prescribing federal wage rate requirements required for construction contracts. Identification as a repeat finding: Yes. See finding 2023-003. Recommendation: We recommend the School Corporation implement a formal process to ensure the contract documentation is retained and that all applicable contracts include the Davis-Bacon clause to ensure compliance with the federal wage rate requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Child Nutrition Cluster, Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: Child Nutrition Cluster Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024, FY2025 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 2 CFR 200.318 states in part: "(a) 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. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 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." Condition: The School Corporation did not have internal controls in place to ensure compliance with the procurement and suspension and debarment requirements. The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchase and simplified acquisition procurement thresholds were followed. Cause: Although the School Corporation has adopted a procurement policy that establishes purchasing requirements based on defined dollar thresholds and requires verification of vendor suspension and debarment status, the policy was not fully adhered to. Required procurement methods were not utilized for certain purchases that exceeded applicable thresholds and the required suspension and debarment verifications were not consistently performed. This condition resulted from insufficient oversight and monitoring to ensure compliance with all aspects of the School Corporation’s procurement policy. 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, procurement procedures for goods and services were not adhered to and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. 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. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $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 micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation did not review procurements done by the food service management company to ensure that proper procurement policies were followed. The School Corporation did not ensure that the food service management company did not use suspended or debarred vendors. During the audit period, we noted two small purchases for which the School Corporation did not have evidence of obtaining multiple quotes or documented rationale for selecting the vendor. Only the final invoice, purchase order, and quote from the selected vendor were available. During fiscal year 2024, we noted that for one of the three vendors tested, the correct procurement method was not followed. Purchases from the vendor were in excess of $150,000 during the fiscal year, requiring the simplified acquisition procurement process; however, the School Corporation applied the small purchase procurement process. The purchase was for equipment at two different buildings. The School Corporation issued two requests for quotes, one for each school, and treated them as separate procurements. However, as the purchases were similar in nature, the requests for quotes were dated the same day and sent to the same vendor, this should have been treated as one procurement in aggregate. The School Corporation did not have support for public advertisement, requests for formal sealed bids, or formal documentation for the basis of award. The lack of internal controls and noncompliance were systemic issues throughout the audit period. 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. During the audit period, we noted two vendors out of three that were sampled, over the $25,000 suspension and debarment threshold for which the School Corporation did not have evidence of a suspension and debarment check. Identification as a repeat finding: No Recommendation: We recommend that the School Corporation strengthen its system of internal control by establishing and implementing policies and procedures to ensure that procurement activities for goods and services comply with applicable requirements and that contractors and subrecipients are verified as not suspended, debarred, or otherwise excluded prior to entering into contracts or subawards. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: COVID-19 - Education Stabilization Fund, Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Programs: Elementary and Secondary School Emergency Relief Fund (ESSER III) Assistance Listings Number: 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Audit Finding: Material Weakness, Internal Control Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." Condition: The School Corporation did not have internal controls in place to ensure compliance with the activities allowed or unallowed and allowable cost/cost principles requirements. The School Corporation had not designed or implemented adequate policies or procedures to ensure that stipend and wage rates were properly reviewed and approved. Cause: Management of the School Corporation did not design an adequate system of internal controls. A properly designed and implemented internal control system should include formal policies and procedures. Policies establish management’s expectations regarding internal controls, while procedures outline the specific actions necessary to implement those policies. Effect: Without the proper design or implementation of the components of a system of internal control, including policies and procedures that provide segregation of duties and additional oversight as needed, the control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. 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. Context: For the testing of activities allowed and unallowed costs-cost principles, 12 vendor disbursements and 40 payroll disbursements were selected for testing. The following deficiencies were noted related to controls over pay rate approvals: • For 10 of 10 stipends sampled, the School Corporation could not provide proper approval of the stipend amount. The total of amount of stipends sampled was $5,056. The total amount of stipends charged to the grant for the audit period was $57,558. • One employee was underpaid by $9, and the error was not caught during the review process. • For two of seven hourly employees sampled, the School Corporation provided a pay chart. However, approval of the rates was not available. • One teacher received twice their regular paycheck amount due to a contract pay off. The School Corporation could not provide approval or additional support related to the contract payoff amount of $1,528. Identification as a repeat finding: No Recommendation: We recommend that the School Corporation strengthen its system of internal control by establishing and implementing policies and procedures to ensure that stipend and wage rates are properly approved and adequate support is maintained to validate those approvals. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2025-001: Significant Deficiency in Internal Control Over Federal Awards – Inadequate Review of Payroll Reports Federal Programs 93.912 and 93.110 U.S Department of Health and Human Services Criteria: Under 2 CFR 200.303 and 2 CFR 200.508, the auditee is required to maintain adequate internal controls over federal awards, including sufficient review and approval procedures to ensure costs charged to the federal program are allowable, properly supported, and accurately coded. Condition: During the transition to a new payroll provider, timesheets were processed and payroll was run without official supervisor review and approval, as required by the Organization’s policy. In several instances, there was no evidence of supervisor approval on the timesheets prior to processing. Cause: The deficiency occurred due to a misunderstanding in the manual approval process during the transition to the new payroll provider. Specifically, supervisors were approving timesheets in the new system but not saving their work, resulting in the absence of official approvals. Effect: This deficiency increases the risk that unauthorized or inaccurate payroll transactions could occur and not be detected or corrected in a timely manner, which could result in noncompliance with applicable federal requirements related to payroll costs. However, we did not identify any questioned costs or evidence of material noncompliance as a result of this deficiency during audit procedures. Questioned Costs: None. Recommendation: The Organization should strengthen payroll approval controls by requiring formal, documented supervisor approval for all timesheets prior to payroll processing, with clear evidence of approval retained for audit purposes. These updates to controls should be included in internal control documents to ensure all users understand their responsibilities. Views of responsible officials: See attached corrective action plan.

Information on the federal program: Subject: Child Nutrition Cluster (CNC) Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (Or Other Identifying Numbers): FY23-FY24, FY24-FY25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed and Unallowed, Allowable Costs Audit Findings: Material Weakness, Other Matters Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g) Be adequately documented. h) Cost must be incurred during the approved budget period. Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The School Corporation did not have adequate internal controls in place to ensure that the School Corporation complied with the allowable cost requirements. Cause: A proper system of internal control was not designed by management of the School Corporation that included a thorough review of expenditures charged to the food service program fund (Fund 0800). Effect: Without the proper implementation of an effectively designed system of internal controls, the control system could not be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs: $6,388 (known questioned costs). Context: During our testing of the School Corporation’s compliance with the allowable cost requirements for the Child Nutrition Cluster (CNC), we tested 40 vendor disbursement transactions and 40 payroll disbursement transactions and identified the following exceptions: 1. For one vendor disbursement, the School Corporation incorrectly recorded the disbursement for $820 to Fund 800 (School Lunch Fund) that should have been recorded to Fund 300 (Operations Fund), resulting in an unallowable cost being charged to the food service fund. 2. For one payroll disbursement, the School Corporation mistakenly entered the number of hours worked by a cafeteria employee for one pay period due to a typo, resulting in an overpayment to the employee by $5,568. The employee notified the School Corporation of the overpayment and remitted the overpayment back to the School Corporation. These errors were attributable to deficiencies in the internal controls over the review and approval of vendor and payroll expenditures. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that management of the School Corporation review internal controls in place to ensure the review controls detect and correct errors in processing transactions including verifying the transactions are recorded to the appropriate fund and hours worked supported by timecards are accurately entered and reviewed prior to processing payments. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Child Nutrition Cluster (CNC) – Internal Controls Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (Or Other Identifying Numbers): FY23-FY24, FY24-FY25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Findings: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Eligibility compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: During testing of internal controls over eligibility requirements, we noted there is no formal, documented review of the eligibility income guidelines entered into the food service software to ensure that system parameters were in agreement with USDA guidelines on an annual basis. For the 2023-2024 school year, the income eligibility guidelines were not updated timely by the School Corporation. During compliance testing of eligibility, we noted 3 instances isolated to 2023-2024, in a sample of 60 students, in which the eligibility status was incorrectly determined. In two instances, the eligibility status was changed from Reduced to Free upon updating the eligibility income guidelines. In one stance, the status changed from Pay to Reduced. The lack of internal controls over the review of the eligibility income guidelines impacted both years under audit. The noncompliance with eligibility determinations was isolated to fiscal year 2024. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the School Corporation implement an internal control to ensure the annual updates to the income eligibility guidelines are updated in the food service software prior to each school year. By July 1 of every year, the new income eligibility guidelines are issued by the USDA and posted on the IDOE website. The income eligibility guidelines updates made to the food service software should be reviewed by two parties to ensure any errors are caught prior to processing applications for the upcoming school year. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Education Stabilization Fund (ESF) Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425U Federal Award Numbers and Years (Or Other Identifying Numbers): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Audit Findings: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 29 CFR 5.5 states in part: 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)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency) 2 CFR 200 Appendix II states in part: In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week.. . .” Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. Questioned Costs: There were no questioned costs identified. Context: The School Corporation did not have an internal controls/procedure in place to ensure compliance with the Davis-Bacon requirement. For one vendor selected for testing, in a sample of two, the School Corporation did not include the wage-rate requirements in the written contract with the vendor to communicate the federal wage rate requirements. The School Corporation did subsequently obtain the weekly wage reports from the vendor. The vendor tested had total costs of $102,800, which includes material and labor, to install a portion of a new roofing to the Junior/Senior High School Building. The finding is isolated to the ESSER III grant (84.425U). Identification as a repeat finding, if applicable: No. Recommendation: We recommend the School Corporation implement an internal control to review contracts funded by federal grants and ensure the contract includes Davis-Bacon wage requirements when required. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2025-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States Assistance Listings Numbers: 84.027; 84.027X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-001-PN01, 22611-001-ARP, 23611-001-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency, Other Matters Condition and Context The School Corporation is a member of the Adams Wells Special Services Cooperative (Cooperative). During the audit period, 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 and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. INDIANA STATE BOARD OF ACCOUNTS 19 NORTH ADAMS COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation did not have internal controls in place during fiscal year 2023-2024 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 nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. During 2023-2024, the staff member providing the services to students did not differentiate between their hours worked with preschool and elementary students on their timesheet. Preschool and elementary services are funded by different grants. As the hours for the elementary services were unavailable, we were unable to determine what hours were worked that applied to the elementary grant. The lack of internal controls and noncompliance was isolated to the 2023-2024 school year. 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 Through inquiry of management and review of documentation, we determined the Cooperative was tracking the hours spent at all nonpublic schools associated with the member schools. However, the staff members were not tracking their time within the nonpublic school between the preschool hours and elementary school hours. The discussion with the Cooperative revealed they were unaware of the requirement to track funds separately. INDIANA STATE BOARD OF ACCOUNTS 20 NORTH ADAMS COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effort Without proper implementation of effectively designed system of internal controls, the Cooperative did not track expenditures for nonpublic services between preschool grant funds and Part B grant funds. Consequently, the amounts requested for reimbursement were not supported by actual hours worked between the preschool and elementary School but rather the combination of nonpublic proportionate share amounts for both grants. Recommendation Management of the Cooperative should develop written policies and procedures which would require tracking of actual nonpublic proportionate share expenditures by grant. Documentation should be maintained to show how these expenditures are being tracked to ensure compliance with the Earmarking requirements. Questioned Costs There were no questioned costs identified. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-001 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2023-2024, FY 2024-2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness INDIANA STATE BOARD OF ACCOUNTS 13 NORTH HARRISON COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-002. 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 and to the verification of free and reduced price applications. Any child enrolled in a participating school 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 the School Breakfast Program, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at 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 generating and the IT Department was responsible for inputting the Direct Certification reports into the School Corporation's software system (Harmony). There was no evidence of an oversight, review, or approval process to ensure that the Direct Certification reports were generated and input into the system correctly and periodically reviewed for updates. The lack of internal controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 14 NORTH HARRISON COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The School Corporation's management had not developed an oversight or review process to ensure that the direct certification report was properly processed and updated. Effect The failure to design or implement a system of internal controls places the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. Noncompliance could result in students either receiving benefits they are not entitled to or not receiving benefits to which they would otherwise be entitled. 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 regarding the processing of direct certifications into the software system. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.