New Philadelphia City School District

2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. § 200. 2 C.F.R. § 200.318(a) requires that the recipient or subrecipient must maintain and use documented procedures for procurement transactions under the Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in §§ 200.317 through 200.327. 2 C.F.R. § 200.318(i) requires that the recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. 2 C.F.R § 200.320 provides three types of procurement methods: informal procurement methods (for micro-purchases and simplified acquisitions); formal procurement methods (through sealed bids or proposals); and noncompetitive procurement methods. For any of these methods, the recipient or subrecipient must maintain and use documented procurement procedures. 2 C.F.R. § 200.320(a)(2) provides the requirements for simplified acquisitions. The aggregate dollar amount of the procurement transaction is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If simplified acquisition procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. New Philadelphia City School District Federal Purchasing Procedures documents small purchases are those from $10,001 to $25,000. The policy stipulates that quotes for small purchases must be obtained from at least two vendors. Quotes may be obtained in writing, verbally, or from a website. Documentation of all quotes must be maintained. While price must be a consideration, other criteria such as quality, availability, service and expertise must also be considered. The rational for the recommended vendor must be documented on the Rubric. The School District did not have the proper internal controls in place to maintain supporting documentation for the procurement history for one of the three selected vendors. During fiscal year 2025 the School District made one procurement falling within the simplified acquisition dollar threshold (formerly referred to as a small purchase) which was for the renewal of a contract for individualized education instruction (IEP) software. However, documentation was not available to support the procurement process for this fiscal year 2025 purchase. Failing to have appropriate controls in place may result in the School District not entering procurement transactions with the most appropriate vendor. The School District should review their policies and procedures and take steps necessary to ensure that procurement procedures are properly followed. The School District should also ensure they comply with the applicable Uniform Guidance requirements, ensuring open competition through procurement.

2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for Appendix II to 2 C.F.R. § 200 which states that, 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 C.F.R. 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. The non-Federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. 29 C.F.R. § 5.5(a)(3)(ii)(A) provides, in part, that the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The required weekly payroll information may be submitted in any form desired. Optional Form WH–347 is available for this purpose from the Wage and Hour Division Web site at http://www.dol.gov/esa/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. 29 C.F.R. § 5.5(a)(3)(ii)(B) requires each payroll submitted be accompanied by a “Statement of Compliance,” signed by the contractor or subcontractor or his or her agent who pays or supervises the payment of the persons employed under the contract. 29 C.F.R. § 5.6 states that furthermore, no payment, advance, grant, loan, or guarantee of funds shall be approved by the Federal agency after the beginning of construction unless there is on file with the agency a certification by the contractor that the contractor and its subcontractors have complied with the provisions of § 5.5 or unless there is on file with the agency a certification by the contractor that there is a substantial dispute with respect to the required provisions. The School District had eight construction projects paid with Elementary and Secondary School Emergency Relief Funds. Two projects were selected for testing, and the following items were noted in regards to prevailing wages with these projects: • Boiler and HVAC Phase III Project – This project involved four subcontractors that performed worked during the fiscal year. However, the School District only received prevailing wage documentation for two of the four subcontractors; • South Boiler Project – The School District received prevailing wage documentation for the primary contractor; however, two subcontractors were utilized and the School District did not receive prevailing wage documentation for them. The School District should implement procedures to ensure that all weekly payroll certification reports are received from the contractors and subcontractors. The School District should also review these reports to ensure that prevailing wages are properly paid. Additionally, the School District should ensure that all contractors and subcontractors are notified that prevailing wages must be paid as required by this compliance requirement. Officials’ Response: See Corrective Action Plan

Sound accounting practices include the implementation of control procedures designed to prevent, detect and correct errors in financial statement or compliance reporting. This includes a system to track assets purchased from Federal funds that documents 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. The School District purchased 134 assets with Elementary and Secondary School Emergency Relief Funds (ESSER), which is part of the Education Stabilization Fund, Assistance Listing 84.425. Three out of 134, or 2.24%, were either not tracked within the School District inventory management system or were tracked with the incorrect Federal participation percentage. This could result in assets not being tracked which increases the risk of misappropriation. In addition, tracking assets at the incorrect Federal participation rate could result improper disposal outside of Federal requirements. The School District should implement procedures to ensure that all assets are properly accounted for within their inventory system, and that all Federal reporting requirements are performed and documented within the system. This will help to mitigate risks of misappropriation, with other inventory controls being implemented, and ensure that all assets include proper documentation. Officials’ Response: See Corrective Action Plan

2 C.F.R. ? 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. ? 200.313. 2 C.F.R. ? 200.313(d)(1) states, in part, that property records must be maintained for equipment and real property purchases using federal funds. The property records should include, but are not limited to, a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), and any ultimate disposition data including the date of disposal and sales price of the property. Additionally, 2 C.F.R. ? 200.313(d)(2) states that a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. During testing over the capital outlay for both Education Stabilization Fund and Special Education Cluster, we found that the School District did not maintain documentation that a physical inventory inspection occurred at least once every two years. Additionally, testing over the District's Special Education Cluster capital outlay listing identified one item totaling $500, which projects to an error of $3,867, that could not be located as it was disposed and not properly removed from the listing. To effectively control equipment and to maintain accountability over expenditures, the School District should review its policy and ensure all equipment is properly identified and recorded on their capital outlay listing. Additionally, the School District should ensure that a physical inventory is performed at least once every two years and that adequate documentation is maintained to support that an inspection was performed.

2 C.F.R. ? 3474.1 gives regulatory effect to the Department of Education for Appendix II to 2 C.F.R. ? 200 which states that, 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 C.F.R. 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. The non-Federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. 29 C.F.R. ? 5.5(a)(3)(ii)(A) provides, in part, that the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The required weekly payroll information may be submitted in any form desired. Optional Form WH?347 is available for this purpose from the Wage and Hour Division Web site at http://www.dol.gov/esa/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. 29 C.F.R. ? 5.5(a)(3)(ii)(B) requires each payroll submitted be accompanied by a ?Statement of Compliance,? signed by the contractor or subcontractor or his or her agent who pays or supervises the payment of the persons employed under the contract. 29 C.F.R. ? 5.6 states that furthermore, no payment, advance, grant, loan, or guarantee of funds shall be approved by the Federal agency after the beginning of construction unless there is on file with the agency a certification by the contractor that the contractor and its subcontractors have complied with the provisions of ? 5.5 or unless there is on file with the agency a certification by the contractor that there is a substantial dispute with respect to the required provisions. The School District had two construction projects (boiler and HVAC unit project and high school roof repair project) paid with Elementary and Secondary School Emergency Relief Funds. The following items were noted in regards to prevailing wages with these projects: ? Although the agreement for the high school roof repair project between the contractor and the School District contained Davis Bacon language, there is no documentation to show that the subcontractor on the project was notified of the requirement to pay prevailing wages. ? The School District did not receive any weekly payroll certifications related to the high school roof repair project even though the project started in April 2022. ? Even though the School District received the weekly payroll certifications reports related to the boiler and HVAC unit project, there is no evidence that the School District reviewed the reports to ensure that prevailing wages were properly paid. The School District should implement procedures to ensure that all weekly payroll certification reports are received from the contractors and subcontractors. The School District should also review these reports to ensure that prevailing wages are properly paid. Additionally, the School District should ensure that all contractors and subcontractors are notified that prevailing wages must be paid as required by this compliance requirement.

Noncompliance and Material Weakness 2 C.F.R. ? 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. ?? 200.1, 200.303, 200.400(d) and 200.403(g). 2 C.F.R. ? 200.303(a) states that a non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should 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 C.F.R ? 200.1 defines an improper payment as any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Incorrect amounts are overpayments or underpayments that are made to eligible recipients (including inappropriate denials of payment or service, any payment that does not account for credit for applicable discounts, payments that are for an incorrect amount, and duplicate payments). An improper payment also includes any payment that was made to an ineligible recipient or for an ineligible good or service, or payments for goods or services not received (except for such payments authorized by law). 2 C.F.R. ? 200.400(d) provides that the non-federal entity must support the accumulation of costs as required by the principles, and must provide for adequate documentation to support costs charge to the federal award. 2 C.F.R. ? 200.403(g) states that the cost must be adequately documented. The School District elected to reallocate expenses to the Elementary and Secondary School Emergency Relief Program (ESSER) that were originally expensed from the General Fund based on three purchase order encumbrances rather than actual expense activity charged to the three purchase orders. One of the purchase orders had no expenses charged against it and one purchase order had a remaining encumbrance balance, as the full purchase order was not expensed. This resulted is unsupported expenses of $278,465. The School District was able to identify other expenses within the General Fund that qualified as allowable ESSER expenditures. However, no internal controls could be identified to prevent or timely detect and correct material noncompliance in relation to the reallocation of federal expenditures. There was no documentation to support the Treasurer (who serves as the grant coordinator) was involved in the reallocation process. The School District should ensure that appropriate internal controls are in place and operating effectively as required by the Uniform Guidance. Without appropriate controls, there is a risk that expenditures charged to a federal program do not meet federal allowable activities and allowable cost requirements.

See Schedule of Findings for chart/table 7 CFR Part 245.6a(c)(1) requires the School District to verify eligibility of children in a sample of household applications approved for free and reduced price meal benefits for that school year. 7 CFR Part 245.6a(f) provides the verification procedures and assistance for households, which includes that they are required to submit the requested information to verify eligibility for free or reduced-price meals, by the date determined by the local educational agency. 7 CFR Part 245.6a, paragraph (a)(7) provides that sources of information for verification include written evidence, collateral contacts, and systems of records. Written evidence shall be used as the primary source of information for verification. Written evidence includes written confirmation of a household?s circumstances, such as wage stubs, award letters, and letters from employers. Whenever written evidence is insufficient to confirm income information on the application or current eligibility, the local educational agency may require collateral contacts. Collateral contacts are verbal confirmations of a household?s circumstances by a person outside of the household. Agency records to which the State agency or local educational agency may have access can also be utilized for verification. The School District selected eight applications for verification. The employee name on the income support provided by one family did not agree to the name listed on application, and the School District did not initiate any further action to ensure that the support received was representative of the applicant or any household member. 7 CFR Part 245.6a(j) requires that if verification activities fail to confirm eligibility for free or reduced price benefits or should the household fail to cooperate with verification efforts, the school or local educational agency shall reduce or terminate benefits, as applicable. As the income support provided could not be tied to a resident of the household, the family did not provide adequate support for eligibility for service and should not have been given a free meal benefit and should have been charged the full price for lunches. However, the family?s meal benefit was not adjusted, and they continued to receive a free meal benefit. Furthermore, this would have led to receiving less program income from providing meals as well as being over reimbursed for claimed meals relating to this family's actual benefit usage. The School District should review the annual Ohio Department of Education Office for Child Nutrition Verification Instruction Manual as well as the Federal requirements outlined within 7 CFR Part 245.6a. All verifications should be performed in accordance with the manual and be performed by someone other than the original verifying official on the initial application. When insufficient support is provided, the School District should consider performing verification by collateral contacts. When this cannot be reasonably performed, the School District should terminate the food service benefits of the family, following the procedures outlined in 7 CFR Part 245.6a. Additionally, all income documentation should be reviewed to ensure that the name on the documentation is for a member of the applicant?s household and that amounts entered into the food service management system are correct. These procedures will help to ensure that benefits are correctly calculated and provided as well as help to ensure that the School District is not over or under reimbursed for claimed free and reduced lunches.

See Schedule of Findings for chart/table According to the School District?s Federal Purchasing Procedures, for small purchases from $10,001 to $250,000, quotes must be obtained from at least two vendors and that these quotes must be maintained. In regards to Noncompetitive Proposal/Sole Source Procurement, the procedure states "when this method of procurement is used, it is a declaration that competition wasn?t available, and the goods or services was only available from a single source subject to the approval of the Ohio Department of Education. As this situation occurs, the District will complete the Request for Approval for a Noncompetitive Proposal Form for All Entities and submit it to the Office of Grants Management for approval. If this is the case, documentation needs to be maintained to support this conclusion." Due to deficiencies in the District?s internal controls over compliance requirements, five percent of the procurements tested did not follow the School District's policy in regards to Sole Source Procurement nor obtain the required price or rate quotations. The School District ordered pizza to be served in the school cafeteria from Dominos as the company meets the USDA requirements for the National School Lunch Program. While the School District claimed that Dominos was the sole source for obtaining pizza locally that met the USDA requirements, it was determined that other vendor(s), such as Pizza Hut, also offered a school lunch program claiming to meet the requirements. As a result, Dominoes would not have been a sole source of the School District and price quotes should have been obtained in accordance with the School District's written procurement procedures. The School District's failure to complete the Request for Approval for a Noncompetitive Proposal Form for All Entities and submit it to the Office of Grants Management for approval or obtain price quotes from any local vendors increases the risk of noncompliance with grant requirements going undetected. The School District should review the federal regulations and School District procedures and ensure that all required policies are adequately addressed.

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