Southeast Fountain School CorporationLocal Government

FINDING 2025-003 Subject: Child Nutrition Cluster - Procurement and 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 Numbers and Years (or Other Identifying Numbers): FY 2023-24, FY 2024-25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment 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 2023-001. INDIANA STATE BOARD OF ACCOUNTS 17 SOUTHEAST FOUNTAIN SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and 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 $150,000 per Indiana Code. 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 of $50,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources, and a contract must be awarded to the vendor. The School Corporation paid one vendor that qualified for small purchases during the audit period. They obtained an adequate number of quotes for the vendor for each fiscal year; however, a contract was not awarded to the vendor either fiscal year. Suspension and Debarment Nonfederal entities and contractors are required to comply with suspension and debarment regulations. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or are ineligible for participation in federal assistance programs or activities. This is done by checking SAM Exclusions, collecting a certification from that entity, or adding a clause or condition to the covered transaction with that entity. The School Corporation did not have effective internal controls to ensure that applicable vendors who received federal funds over certain thresholds were not suspended or debarred from participating in federal awards programs. For two of three vendors subject to suspension and debarment requirements during the audit period, the School Corporation did not perform procedures to ensure the vendor was not suspended or debarred or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria The Indiana State Board of Accounts (SBOA) is required under Indiana Code 5-11-1-27(e) to define the acceptable minimum level of internal control standards. To provide clarifying guidance, the State Examiner compiled the standards contained in the manual, Uniform Internal Control Standards for Indiana Political Subdivisions. All political subdivisions subject to audit by SBOA are expected to adhere to these standards. The standards include adequate control activities. According to this manual: "Control activities are the actions and tools established through policies and procedures that help to detect, prevent, or reduce the identified risks that interfere with the achievement of objectives. Detection activities are designed to identify unfavorable events in a timely manner whereas prevention activities are designed to deter the occurrence of an unfavorable event. Examples of these activities include reconciliations, authorizations, approval processes, performance reviews, and verification processes. INDIANA STATE BOARD OF ACCOUNTS 18 SOUTHEAST FOUNTAIN SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) An integral part of the control activity component is segregation of duties. . . . There is an expectation of segregation of duties. If compensating controls are necessary, documentation should exist to identify both the areas where segregation of duties are not feasible or practical and the compensating controls implemented to mitigate the risk. . . ." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control . . ." 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." 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 Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). (b) A purchasing agent may purchase supplies under this section by inviting quotes from at least three (3) persons known to deal in the lines or classes of supplies to be purchased. (c) The purchasing agent shall mail an invitation to quote to the persons described in subsection (b) at least seven (7) days before the time fixed for receiving quotes. (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." INDIANA STATE BOARD OF ACCOUNTS 19 SOUTHEAST FOUNTAIN SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause Management thought they only needed a contract when a transaction was over $50,000 and not when the total for a vendor was over $50,000. Management didn't realize they didn't have the appropriate information for the suspension and debarment requirement. Management had not developed nor implemented an effective system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The lack of an internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could enable the School Corporation to contract with vendors who are suspended and debarred from receiving federal grant funding. Questioned Costs There were no questioned costs identified. Recommendation We recommended the School Corporation's management strengthen its system of internal controls over procurement and suspension and debarment requirements to ensure vendors are not suspended and debarred from receiving federal grant funding and to ensure that contracts are procured as required. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-004 Subject: Child Nutrition Cluster - Special Tests and Provisions - School Food Accounts, Reporting 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 2023-24, FY 2024-25 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Special Tests and Provisions - School Food Accounts, Reporting Audit Finding: Material Weakness Condition and Context An effective internal control system, which would include segregation of duties, was not properly implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions - School Food Accounts and Reporting compliance requirements. Special Tests and Provisions - School Food Accounts The School Corporation reviews and approves receipts, which include monthly sponsor claim reimbursements, in a Weekly Receipt Posting Report. Upon review of the Weekly Receipt Posting Reports, it was determined they contained multiple weeks of receipts instead of one week. INDIANA STATE BOARD OF ACCOUNTS 20 SOUTHEAST FOUNTAIN SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Reporting Monthly sponsor claims for reimbursement are prepared by the Aramark manager and provided to the School Corporation's Treasurer to review. There was no documentation to determine the Aramark's manager prepared the claims or that the Treasurer reviewed them for multiple months in the audit period. The lack of internal controls were systemic issues throughout the audit period. Criteria The Indiana State Board of Accounts (SBOA) is required under Indiana Code 5-11-1-27(e) to define the acceptable minimum level of internal control standards. To provide clarifying guidance, the State Examiner compiled the standards contained in the manual, Uniform Internal Control Standards for Indiana Political Subdivisions. All political subdivisions subject to audit by SBOA are expected to adhere to these standards. The standards include adequate control activities. According to this manual: "Control activities are the actions and tools established through policies and procedures that help to detect, prevent, or reduce the identified risks that interfere with the achievement of objectives. Detection activities are designed to identify unfavorable events in a timely manner whereas prevention activities are designed to deter the occurrence of an unfavorable event. Examples of these activities include reconciliations, authorizations, approval processes, performance reviews, and verification processes. An integral part of the control activity component is segregation of duties. . . . There is an expectation of segregation of duties. If compensating controls are necessary, documentation should exist to identify both the areas where segregation of duties are not feasible or practical and the compensating controls implemented to mitigate the risk. . . ." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control . . ." 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." Cause The Treasurer stated they have Weekly Receipt Posting Reports; however, they are usually too busy to run them weekly and will be changing them to monthly reports. There were no signatures or other type of documentation to show that one employee prepared the monthly sponsor claims for reimbursement and another employee reviewed them for multiple months reviewed. INDIANA STATE BOARD OF ACCOUNTS 21 SOUTHEAST FOUNTAIN SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The lack of an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Special Tests and Provisions - School Food Accounts and Reporting compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation change the Weekly Receipt Posting Reports to monthly reports. We recommended that the School Corporation states who prepares and who reviews the monthly sponsor claims on each claim. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2023-001 Subject: Child Nutrition Cluster - Procurement and 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 Numbers and Years (or Other Identifying Numbers): FY 21-22, FY 22-23, 222IN059N8903, 232IN059N8903 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 15 INDIANA STATE BOARD OF ACCOUNTS 15 SOUTHEAST FOUNTAIN SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context 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. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transaction. Three covered transactions, that equaled or exceeded $25,000, were identified. All three transactions, totaling $1,408,264, were selected for testing. For one of three vendors, the School Corporation had not performed procedures to ensure the vendor was not suspended or debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. The total amount spent with the vendor was $169,723. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to fiscal year 2022-2023. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 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 tend to do business is not excluded or disqualified. You do this by: (a) Checking 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 16 SOUTHEAST FOUNTAIN SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include a segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper system of 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 were not verified by the School Corporation to not be suspended or debarred from participating in federally funded activities. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls and obtain documentation that vendors with covered transactions are not suspended or debarred. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2021-002 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - School Breakfast Program, COVID-19 - National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 19-20, FY 20-21 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Eligibility compliance requirement. The Free and Reduced-Price Applications (applications) were required to be submitted online. The Elementary School Secretary was responsible for verifying that the computer software made the correct determination for eligibility by verifying 10 percent of the applications. There was no evidence of an oversight, review, or approval process that ensured the eligibility determination made by the software system was accurate. In addition, there was no evidence that the Direct Certifications were correctly and properly included in the software system, or that there was an oversight, review, or approval process over the Direct Certifications. 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). . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Eligibility 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 requirement. A lack of segregation of duties within an internal control system could also allow noncompliance with the compliance requirement and allow 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. Recommendation We recommended that the School Corporation's management establish a system of internal control, including segregation of duties, to ensure compliance with the grant agreement and the Eligibility 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 2021-003 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program, COVID-19 - School Breakfast Program, COVID-19 National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 19-20, FY 20-21 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Allowable Costs/Cost Principles compliance requirement. The School Corporation did not have written procedures for determining the allowability of costs in accordance with 2 CFR 200 Subpart E. The School Corporation entered into a Fixed Price Meal Contract with a food service management company (FSMC). For each meal type, a fixed price was established and billed by the FSMC based on meal counts served. The School Corporation failed to compare the invoices received from the FSMC to the School Corporation's software reports to ensure the number of meals invoiced agreed to the meals served. The invoices from the FSMC did not match the meals served for the time frame being invoiced for three of the four invoices tested. The invoice paid on March 13, 2020, was for 7 more elementary school breakfasts and 7 more lunches than served. The invoice paid on October 21, 2020, was for 2 more elementary breakfasts and 1 more elementary lunch than was served. In addition, the October 21, 2020, invoice paid, was for 120 less high school breakfasts and 480 less high school lunches than were served. The invoice paid on March 19, 2021, was for 2 more elementary school breakfasts and 14 less elementary school lunches than were served, while the high school reported 14 more lunches invoiced than were served. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federallyfinanced 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. . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the compliance requirement could have resulted in the loss of funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal control, including segregation of duties, to ensure compliance with the grant agreement and the Allowable Costs/Cost Principles 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 2021-004 Subject: Child Nutrition Cluster - Cash Management 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 19-20, FY 20-21 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Cash Management Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Cash Management compliance requirement. The School Corporation had not designed or implemented adequate internal controls to ensure that the claims submitted for reimbursement of meals served (reimbursement claims) were accurate. The number of meals served on the reimbursement claims did not match the meals served per the School Corporation's software system reports for two of the three reimbursements tested. The January 2020 reimbursement claim for the high school reported 11 less reduced-price breakfasts than were served. The April 2021 reimbursement claim for the elementary school reported 1 more free lunch and 2 more breakfasts than were served, and the high school reported 1 more free breakfast than was served. 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 200.305 states in part: "(a) For states, payments are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR Part 205 and Treasury Financial Manual (TFM) 4A?2000, 'Overall Disbursing Rules for All Federal Agencies'. (b) For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. See also ? 200.302 (b)(6). Except as noted elsewhere in this part, Federal agencies must require recipients to use only OMB-approved standard governmentwide information collection requests to request payment. . . . (3) Reimbursement is the preferred method when the requirements in paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per ? 200.208, or when the non-Federal entity requests payment by reimbursement. This method may be used on any Federal award for construction, or if the major portion of the construction project is accomplished through private market financing or Federal loans, and the Federal award constitutes a minor portion of the project. When the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Cash Management compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the compliance requirement could have resulted in the loss of funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal control, including segregation of duties, to ensure compliance with the grant agreement and the Cash 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 2019-002 Subject: Child Nutrition Cluster - Procurement Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program CFDA Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 17-18, FY 18-19 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context 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 Procurement and Suspension and Debarment compliance requirement. The School Corporation had not established proper procurement methods prior to purchasing goods. The School Corporation purchased goods under the small purchase and micro purchase threshold for both years of the audit period without the appropriate procurement procedures. Small Purchases The School Corporation did not obtain price or rate quotes from an adequate number of sources for purchases of goods or services exceeding $3,500, which fell under the small purchase procedures. Additionally, the School Corporation did not document the rationale for the method of procurement, especially when a noncompetitive proposal method was used. Micro-Purchase The School Corporation did not have procedures in place to ensure that micro-purchases were distributed equitably among qualified suppliers for purchases less than $3,500. The lack of controls and noncompliance was a systemic issue, which occurred 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 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 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. (a) Procurement by micro-purchases. Procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micropurchase threshold (? 200.67 Micro-purchase). To the extent practicable, the non-Federal entity must distribute micro-purchases equitably among qualified suppliers. Micropurchases may be awarded without soliciting competitive quotations if the non-Federal entity considers the price to be reasonable. (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. . . ." Cause Management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Department compliance requirement. Effect The failure to establish an effective internal control system enabled noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish controls and comply with the grant agreement and the Procurement and Suspension and Debarment 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 2019-003 Subject: Child Nutrition Cluster - Program Income Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program CFDA Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 17-18, FY 18-19 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Program Income Audit Findings: Material Weakness, Other Matters Condition and Context 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 Program Income compliance requirement. The School Corporation had not designed or implemented adequate controls to ensure program income was correctly recorded. The report the Treasurer used to review daily activity did not include cash sales for the day; therefore, only prepaid funds were being posted. The transfer was not being made to the appropriate revenue classifications (1611 to 1614 series) in the School Lunch fund. The only revenue classification used was 1611. The School Corporation had not designed or implemented adequate controls to ensure that program income was properly charged. Adults who charged meals to their child's prepaid accounts were incorrectly charged the student lunch price, rather than the adult lunch price established by the School Board. The lack of 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 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). . . ." 7 CFR 210.14(c) states: "Financial assurances. The school food authority shall meet the requirements of the State agency for compliance with ? 210.19(a) including any separation of records of nonprofit school food service from records of any other food service which may be operated by the school food authority as provided in paragraph (a) of this section." 7 CFR 210.14(f)(3) states: "All revenue from the sale of nonprogram foods shall accrue to the nonprofit school food service account of a participating school food authority." 7 CFR 225.6(e) states in part: "State-Sponsor Agreement. A sponsor approved for participation in the Program must enter into a permanent written agreement with the State agency. All sponsors must agree in writing to: . . . (12) Maintain a financial management system as prescribed by the State agency; . . ." When a student puts money into their individual meal account, it should not be considered income to the child nutrition program until that student goes through the lunch line and charges a meal to their account. Therefore, while money is in the student's individual account, the balance should not be included in Fund 800 School Lunch. A school should set up a clearing account with the fund number of 8400 Prepaid School Lunch Accounts, which is included in Chapter 4 of the State Board of Accounts Uniform Compliance Guidelines for Indiana Public School Corporations. When a student brings in a deposit the receipt should be recorded to fund 8400 using receipt account 1630 Special Functions. After the student has charged meals, you should disburse the amount charged from 8400 using expenditure account 31900 Other Food Services and receipt this into fund 800 using the Food Services receipt accounts 1611-1623 at the time established in a written school policy to ensure accurate monthly reporting. At this point the receipts are considered program income and should be included on any reports that are required to be completed. Also, on a monthly basis it is required that the balance of the 8400 fund be reconciled with the total of the individual meal accounts. (The School Bulletin and Uniform Compliance Guidelines, February 2019) 2 CFR 200.302(b)(3) states: "Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation." Cause The School Corporation had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Program Income compliance requirement. Effect The failure to establish an effective internal control system enabled noncompliance with the grant agreement and the Program Income compliance requirement. 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 Program Income 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 2019-004 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children CFDA Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 17-18, FY 18-19 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness Condition and Context 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. The IT Director updated the income guidelines in the computer system, which makes the determination for free and reduced lunch applications, without a review or oversight process to ensure its accuracy. The lack of 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 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). . . ." Cause Management of the School Corporation had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Eligibility 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 Eligibility compliance requirement. A lack of segregation of duties within an internal control system could also allow noncompliance with the compliance requirements and allow 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. Recommendation We recommended that the School Corporation's management establish and maintain a system of internal controls to ensure compliance with the grant agreement and Eligibility compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.