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FINDING 2025-013 Subject: Head Start Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Health and Human Services Federal Program: Head Start Assistance Listings Number: 93.600 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024 PY24, FY2024 PY25 Pass-Through Entity: Geminus Corporation Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Condition and Context The School Corporation had established a process that included a review of payroll reports; however, these reports did not include fund or account information. Without the fund or account information, the internal control could not detect if payroll disbursements were for allowable activities and costs of the grant. The lack of internal controls over payroll was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause Management had not developed an adequate system of internal controls to ensure disbursements were paid from the proper funds. Effect The failure to establish an effective system of internal controls could have enabled material noncompliance with the grant agreement and the compliance requirements to go undetected. 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 to ensure disbursements are in compliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 41 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.