Niles City School DistrictLocal Government

2 CFR section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control over the Federal awards 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 awards. The School District employs a food service management company to oversee and conduct the activities of the food service department. The School District paid a lump sum to the food service management company each month, but there was no evidence that the School District reviewed any of the supporting invoices to verify amounts paid were for allowable activities and costs. Failure to have policies and procedures over allowable activities and allowable costs could result in unallowable costs and activities being charged to the federal program. The School District should review all detailed invoices from their food service management company. The School District should ensure to only reimburse the food service management company for allowable activities and costs for the Nutrition Cluster Federal Program.

2 CFR section 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. Testing over the District's Elementary and Secondary School Emergency Relief funds (ESSER) purchases identified purchases totaling $74,774, that were not recorded on the Fixed Asset Detail Report. This is the result of the District not reviewing their policies and the Fixed Asset Detail Report. Failure to ensure equipment purchases are included on the District's inventory listing could result in a misappropriation of the equipment and a possible future loss of funding. To effectively control equipment and to maintain accountability over expenditures, the District should review its policy and ensure all equipment is properly identified and recorded on their Fixed Asset Detail Report.

2 CFR part 200 Appendix II requires all laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) (40 USC 3141?3144, 3146, and 3147. Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326). This reporting is often done using Optional Form WH-347, which includes the required statement of compliance (OMB No. 1235-0008). The DOL, Employment Standards Administration, maintains a Davis-Bacon and Related Acts web page (https://www.dol.gov/agencies/whd/government-contracts/construction). The District did not obtain the required certified payroll reports for a construction contract in excess of $2,000. In addition, the contract did not contain a provision to comply with wage rate requirements. The contract cost was $30,206. The District should include prevailing wage provisions in all construction contracts or agreements involving federal funds exceeding $2,000. The District should obtain weekly certified payroll reports from the contractor.

2 CFR section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control over the Federal awards 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 awards. The District employs a food service management company to oversee, and conduct the activities of the food service department. When testing applications for students to receive free and reduced lunches, it was determined that an employee of the food service management company signs off on all applications. There is no evidence that an employee of the District also reviewed the applications verifying students were eligible for free or reduced lunches. 7 CFR Part 245.6a(c)(1) states the local educational agency must verify eligibility or children in a sample of household applications approved for free and reduced price meal benefits for that school year. In addition, 7 CFR Part 245.6a (f)(7) states that based on the verification activities, the local educational agency shall make appropriate modifications to the eligibility determinations made initially. The local educational agency must notify the household of any change. Households must be notified of any reduction in benefits in accordance with paragraph (j) of this section. Further, 7 CFR Part 245.6(c)(3)(iii) states that if there are changes resulting from verification or administrative reviews, the local educational agency must change the children?s eligibility status when a change is required as a result of verification activities conducted under A?245.6a or as a result of a review conducted in accordance with Part 210.18 of this chapter. We obtained the School District?s Verification Summary Report (the Report). The Report stated that seven free and reduced applications were selected for verification. Of the seven applications selected for verification, we noted the following: ? One application originally marked as free that responded should have been moved to reduced based on their income. The District contracts with a food service management company to run their food service department. That company has an employee they use as the Food Service Supervisor for the District. No employee of the District is reviewing the applications that come up for verification. The only person reviewing the applications is the Food Service Supervisor. The District did not have controls in place to help prevent or detect these errors. The District should establish internal controls to verify that students are eligible to receive free and reduced lunches. The District should also review free and reduced applications that are selected for verifications for accuracy.

2 CFR ? 400.1 gives regulatory effect to the USDA for 2 CFR ? 200.318(a)(b) which states that a non-Federal entity must use its own documented procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal law and standards. Non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions and specification of their contracts. Additionally, 7 CFR 225 Subpart C Section 225.15(m)(4) states that in addition to any applicable State or local laws governing bid procedures, each District which contracts with a Consortium shall ensure that the Consortium is in compliance with fair and open competition over all purchases. The District contracts with a consortium, to enter into food contracts on its behalf. The District has outlined its monitoring requirements over the Consortium?s adherence to state and federal procurement requirements over full and open competition. However, the District did not have procedures in place documenting the monitoring that the Consortium was complying with the fair and open competition requirements. Additionally, the District did not have internal controls in place to monitor suspension and debarment with the District?s food service vendors. The District should ensure it is following its procurement policy and maintain documentation of the monitoring the Consortium is in compliance with the fair and open competition requirements and the monitoring of suspension and debarment on vendors.

2 CFR section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control over the Federal awards 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 awards. The District employs a food service management company to oversee and conduct the activities of the food service department. The District paid a lump sum to the food service management company each month, but there was no evidence that the District reviewed any of the supporting invoices to verify amounts paid were for allowable activities and costs. Failure to have policies and procedures over allowable activities and costs could result in unallowable costs being charged to the federal program and/or future reductions in federal awards amounts. The District should review all detailed invoices from their food service management company. The District should also ensure to only reimburse the food service management company for allowable activities and costs for the Nutrition Cluster Federal Program.

Management acknowledged its responsibility to establish and maintain effective internal controls to reasonably assure compliance with federal statutes, regulations and terms and conditions of federal awards and controls relating to preparing the Schedule of Expenditures of Federal Awards (the Schedule), as required by Uniform Guidance (2 CFR ? 200.303(a)), in the audit engagement letter. Furthermore, Uniform Guidance (2 CFR Subpart F ? 200.510(b)) requires the auditee prepare the Schedule for the period covered by the District's financial statements which must include the total federal awards expended as determined in accordance with ? 200.502. At a minimum, the schedule must: 1. List individual Federal programs by Federal agency. 2. For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. 3. Provide total Federal awards expended for each individual Federal program and the CFDA number or other identifying number when the CFDA information is not available. 4. Include the total amount provided to subrecipients from each Federal program. 5. For loan or loan guarantee programs described in ?200.502 Basis for determining Federal awards expended, paragraph (b), identify in the notes to the schedule the balances outstanding at the end of the audit period. 6. Include notes that describe the significant accounting policies used in preparing the schedule, and note whether or not the auditee has elected to use the 10 percent de minimis cost rate as covered in ?200.414 Indirect (F&A) costs. The Schedule provided by the District had the following misstatements: ? School Breakfast Program expenditures included $494.06 in state receipts. ? School Lunch Program expenditures included $16,215.47 in state receipts. ? School Meals Equipment grant of $104,322.84 was not reported. In addition to NSLP funding, the District also received Covid-19 Federal Funding. Per AOS SEFA Guidance, Covid related funding must be identified on a separate line item with a designation identifying them as Covid. Adjustments, to which management has agreed, are reflected in the accompanying Schedule. Ineffective internal controls related to federal grants could lead to noncompliance with program requirements. Errors and omissions to the Schedule could have an adverse effect on future grant awards by the awarding agency or agencies in addition to an inaccurate assessment of major federal programs that would be subjected to audit. Entity management should implement a system to review the Schedule for errors and omissions. This may help ensure the Schedule is complete and accurate and major federal programs are correctly identified for audit.

The Ohio Department of Education?s CCIP Final Expenditure Report Completion Steps, states all CCIP Final Expenditure Reports (FERs) must be completed online and may be started after June 30th, the end of the fiscal year. In addition, each Funding Application within the CCIP has its own separate final expenditure report. Each Local Education Agency (LEA) must ensure each FER(s) is submitted to ODE with Superintendent Approval no later than September 30. The District?s Title I final expenditure report amount that was filed timely was understated by $147,633 compared to the District?s system. The report was corrected but was refiled past the due date on October 29. The District did not have adequate controls in place to help prevent the error. The District should implement procedures to file their Final Expenditure Report by September 30 and also ensure they file the correct amount.

2 CFR section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control over the Federal awards 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 awards. The District employs a food service management company to oversee, and conduct the activities of the food service department. When testing applications for students to receive free and reduced lunches, it was determined that an employee of the food service management company signs off on all applications. There is no evidence that an employee of the District also reviewed the applications verifying students were eligible for free or reduced lunches. 7 CFR Part 245.6a(c)(1) states the local educational agency must verify eligibility or children in a sample of household applications approved for free and reduced price meal benefits for that school year. In addition, 7 CFR Part 245.6a (f)(7) states that based on the verification activities, the local educational agency shall make appropriate modifications to the eligibility determinations made initially. The local educational agency must notify the household of any change. Households must be notified of any reduction in benefits in accordance with paragraph (j) of this section. Further, 7 CFR Part 245.6(c)(3)(iii) states that if there are changes resulting from verification or administrative reviews, the local educational agency must change the children?s eligibility status when a change is required as a result of verification activities conducted under A?245.6a or as a result of a review conducted in accordance with Part 210.18 of this chapter. We obtained the School District?s Verification Summary Report (the Report). The Report stated that seven free and reduced applications were selected for verification. Of the seven applications selected for verification, we noted the following: ? Three applications originally marked as reduced that responded should have been moved to paid based on their income. ? One application originally marked as free that responded should have been moved to paid based on their income. ? One application originally marked as free that responded should have been reduced to begin with based on their income. After verification this application was still eligible to be in the reduced category. However, the District kept this application at free. ? There were two applications on the Report that were marked as responded, and moved to paid. However, these applications should have been marked as not responded, and moved to paid. Also, one of these applications was originally marked as free, but based on their income they should have been reduced. The District contracts with a food service management company to run their food service department. That company has an employee they use as the Food Service Supervisor for the District. No employee of the District is reviewing the applications that come up for verification. The only person reviewing the applications is the Food Service Supervisor. The District did not have controls in place to help prevent or detect these errors. The District should establish internal controls to verify that students are eligible to receive free and reduced lunches. The District should also review free and reduced applications that are selected for verifications for accuracy.

2 CFR Subpart F ? 200.510(b) requires the auditee prepare a Schedule of Expenditures of Federal Awards (the Schedule) for the period covered by the entity?s financial statements which must include the total federal awards expended as determined in accordance with ?200.502. At a minimum, the schedule must: 1. List individual Federal programs by Federal agency. 2. For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. 3. Provide total Federal awards expended for each individual Federal program and the CFDA number or other identifying number when the CFDA information is not available. 4. Include the total amount provided to subrecipients from each Federal program. 5. For loan or loan guarantee programs described in ? 200.502 Basis for determining Federal awards expended, paragraph (b), identify in the notes to the schedule the balances outstanding at the end of the audit period. 6. Include notes that describe the significant accounting policies used in preparing the schedule, and note whether or not the auditee has elected to use the 10 percent de minimis cost rate as covered in ? 200.414 indirect (F&A) costs. The District did not compile an accurate Schedule. The Schedule provided by the District had the following misstatements to expenditure amounts: ? Expenditures reported did not agree to the District?s financial records. ? School Lunch Program expenditures of $658,897.64, School Breakfast Program expenditures of $200,901.42, and Donated Commodities Non-Cash transactions of $89,504.40 were not reported. Errors and omissions to the Schedule could have an adverse effect on future grant awards by the awarding agency or agencies in addition to an inaccurate assessment of major federal programs that would be subjected to audit. Adjustments, to which management have agreed, are reflected in the accompanying Schedule. District management should review all grant and loan award documents in order to execute policies and procedures which help ensure compliance with grant and loan requirements, including Schedule reporting requirements. The District should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This may help ensure the District is in compliance with grant and loan requirements, the Schedule is complete and accurate, and major federal programs are accurately identified for audit.

2 CFR ? 400.1 gives regulatory effect to the USDA for 2 CFR ? 200.318(a)(b) which states that a non-Federal entity must use its own documented procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal law and standards. Non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions and specification of their contracts. Additionally 7 CFR 225 Subpart C Section 225.15(m)(4) states that in addition to any applicable State or local laws governing bid procedures, each District which contracts with a Consortium shall ensure that the Consortium is in compliance with fair and open competition over all purchases. The District contracts with a consortium, to enter into food contracts on its behalf. The District has outlined its monitoring requirements over the Consortium?s adherence to state and federal procurement requirements over full and open competition. However, the District did not have procedures in place documenting the monitoring that the Consortium was complying with the fair and open competition requirements. Additionally, the District did not have internal controls in place to monitor suspension and debarment with the District?s food service vendors. The District should ensure it is following its procurement policy and maintain documentation of the monitoring the Consortium is in compliance with the fair and open competition requirements and the monitoring of suspension and debarment on vendors.

2 CFR section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control over the Federal awards 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 awards. The District employs a food service management company to oversee, and conduct the activities of the food service department. An employee of the food service management company submits claims for reimbursement to the Ohio Department of Education. There was no evidence that any employee of the District reviewed or approved these claims before they were sent. The District should establish internal controls to verify that claims for reimbursement submitted for the Nutrition Cluster are correct.

2 CFR section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control over the Federal awards 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 awards. The District employs a food service management company to oversee and conduct the activities of the food service department. The District paid a lump sum to the food service management company each month, but there was no evidence that the District reviewed any of the supporting invoices to verify amounts paid were for allowable activities and costs. In total, the District paid $521,294.37 to the food service management company. We noted one instance where the District paid a vendor without having a purchase order signed by the Superintendent and Treasurer. The total of this transaction was $31.54. Additionally, we identified several unallowable costs/activities being paid to the food service management company. The following expenditures were determined to be unallowable: ? The District expended a total of $1,111 to a local pizza shop despite not receiving actual invoices from the pizza shop. Amounts were only supported by a blank order form. ? $876 to a different local pizza shop without proper invoices ? Total of $47.70 paid in sales tax to various vendors ? $5 gift card bought for a student that does not eat in the cafeteria ? $72.99 Amazon payment that did not detail what was purchased ? $165.08 in travel reimbursements for an employee of the food service management company, not an employee of the District to drive to other School Districts ? $1,000 for training, but no description of what training was for, or how amount was calculated ? $1,675.56 in food service management company insurance liability fees that should have been indirect costs approved by ODE. No approval from ODE was on file ? $187.49 in other miscellaneous receipts that either lacked a detailed invoice, or should have been paid from the General Fund. These transactions total $5,140.82. Based on the errors found, we project total unallowable costs/activities for the Nutrition Cluster Program to total $17,786. The District should review all detailed invoices from their food service management company. The District should also ensure to only reimburse the food service management company for allowable activities and costs for the Nutrition Cluster Federal Program.

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