Danville Community School Corporation

FINDING 2020-002 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles, Program Income, Special Tests and Provisions School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children CFDA Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): SY18-19, SY19-20 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Allowable Costs/Cost Principles, Program Income, Special Tests and Provisions - School Food Accounts 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, Program Income, and Special Tests and Provisions - School Food Accounts compliance requirements. There were no internal controls in place to ensure that only applicable employees were paid from program funds. The School Corporation paid $14,800 of the Treasurer's salaries/wages from the School Lunch fund based on fixed percentages. There was no supporting documentation to indicate how these amounts were determined. There were no internal controls in place to ensure that payroll benefits paid from the School Lunch fund were for employees working within that program. Payroll benefits were paid without an oversight, review, or approval process. Six of forty payroll benefit payments tested, totaling $1,247, did not have supporting documentation. The lack of internal controls and noncompliance were systemic issues that 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 the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." 7 CFR 220.7(e) states in part: "Each school food authority approved to participate in the program shall enter into a written agreement with the State agency or the Department through the FNSRO, as applicable, that may be amended as necessary. . . . Such agreements shall provide that the School Food Authority shall, with respect to participating schools under its jurisdiction: (1)(i) Maintain a nonprofit school food service; . . . (ii) In accordance with the financial management system established under ? 220.13(i) of this part, use all revenues received by such food service only for the operation or improvement of that food service Except that, facilities, equipment, and personnel support with funds provided to a school food authority under this part may be used to support a nonprofit nutrition program for the elderly, including a program funded under the Older Americans Act of 1965 (42 U.S.C. 3001 et seq.); . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." Cause Management had not developed a system of internal controls that would have ensured compliance with the compliance requirements listed above. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the compliance requirements could have resulted in the loss of federal funds to the School Corporation. Questioned Costs Questioned costs of $14,800 were identified for the audit period, as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls related to the grant agreement and the Allowable Costs/Cost Principles, Program Income, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2020-002 Contact Person Responsible for Corrective Action: Matthew Parkinson, CFO Contact Phone Number: 317-745-2212 Views of Responsible Official: We concur with the finding. Description of Corrective Action Plan: The corporation treasurer?s salary and benefits are no longer charged to the child nutrition cluster effective 8/7/2020. Beginning with the payroll of 4/30/21, a payroll report will be generated indicating the breakdown of account numbers for those staff members who are paid with federal grant money. This report will be reviewed and initialed by the corporation treasurer and CFO. The reports will be kept on file for auditing purposes. Effective 4/19/2021, DCSC?s payroll distribution report was reviewed by the corporation treasurer to ensure our payroll benefits, ie, FICA and PERF were designated to the appropriate fund, cost center and location code. Anticipated Completion Date: Payroll report to be generated for review effective 4/30/2021. Payroll distribution report was reviewed for accounting verification of payroll benefits effective 4/19/2021.

FINDING 2020-003 Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance Federal Agency: Department of Education Federal Programs: Special Education_Grants to States, Special Education_Preschool Grants CFDA Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 18611-119-PN01, 19611-119-PN01, 20611-119-PN01, 19619-119-PN01, 20619-119-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/ Cost Principles, Period of Performance 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 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance compliance requirements. Activities Allowed or Unallowed and Allowable Costs/Cost Principles There were no internal controls in place to ensure that payroll benefits paid from the special education funds were for employees working within those programs. Payroll benefits were paid without an oversight, review, or approval process, or other compensating control. Period of Performance The School Corporation had not properly developed or implemented an internal control process to ensure transfers were within the period of performance. Transfers were made without an oversight, review, or approval process, or other compensating control. The lack of internal controls was a systemic issue that 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 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 controls that would have ensured compliance with the compliance requirements listed above. Effect The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements listed above. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls, including segregation of duties, to ensure compliance with the grant agreement and Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2020-003 Contact Person Responsible for Corrective Action: Matthew Parkinson, CFO Contact Phone Number: 317-745-2212 Views of Responsible Official: We concur with these findings. Description of Corrective Action Plan: Beginning with the payroll of 4/30/21, a payroll report will be generated indicating the breakdown of account Numbers for those staff members who are paid with federal grant money. This report will be reviewed and initialed by the corporation treasurer and CFO. The reports will be kept on file for auditing purposes. Beginning 4/22/21, any revenue or expenditure transfer adjustments made to our federal grants will be documented and initialed by our corporation treasurer and CFO. The reports will be kept on file for auditing purposes. Anticipated Completion Date: The payroll correction will begin on 4/30/21. The transfer documentation will begin 4/22/21.