South Adams Schools

Information on the federal program: Subject: Education Stabilization Fund (ESSER) – Internal Controls Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers: S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness Criteria: 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), 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. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." Condition: 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 Equipment and Real Property Management Requirements compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure 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. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed 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. Context: During the grant period, the School Corporation expended a total of $5,803,458 in Education Stabilization Funds (ESSER) for a building project. Although this project was included in the School Corporation's capital asset records, it was recorded at the estimated total project cost of $6,256,000 in a prior audit period prior to these costs being expended. In addition, the School Corporation did not designate the amount of the project that was paid with federal grant funds, complete an inventory in the two-year audit period, or record expenditures and report budgeted amounts in the proper object code. Identification as a repeat finding: Yes. See finding 2022-006 Recommendation: We recommend the School Corporation update the capital asset listing at least annually to include all equipment and real property acquisitions and review for potential capital asset dispositions. The capital asset listing should include all required information to track capital asset acquisitions purchased with federal funding. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Education Stabilization Fund (ESSER) – Internal Controls Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Finding: Material Weakness Context: During the grant period, the School Corporation expended a total of $5,803,458 in Economic Stabilization Funds (ESSER) for a building project. Although this project was included in the School Corporation's capital asset records, it was recorded at the estimated total project cost of $6,256,000 in a prior audit period prior to these costs being expended. In addition, the School Corporation did not designate the amount of the project that was paid with federal grant funds, complete an inventory in the two-year audit period, or record expenditures and report budgeted amounts in the proper object code. Contact Person Responsible for Corrective Action: Heidi Sprunger Contact Phone Number: 260-589-3133 Views of Responsible Official: We concur with the finding. Description of Corrective Action Plan: The School Corporation will reach out to Asset Controls to have them fix the expended amount of $5,803,458 to reflect on our reports. The School Corporation will also have Asset Controls itemize which project was paid for with federal grant funds to reflect our reports. The School Corporation will put into place the following schedule to update our inventory to stay in compliance with state and federal requirements. The School Corporation will have Asset Controls or the Director of Operations physically count the inventory of capital assets on even year audits. During the odd year audits, the School Corporation will have Asset Controls or the Director of Operations perform a perpetual count. Anticipated Completion Date: 06/30/2025

2022-006

FINDING 2022-005 Information on the federal program: Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listing Number: 84.027, 84.173 Federal Award Number: 20611-001-PN01, 21619-001-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:? (g) Be adequately documented.... " 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed..." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range Condition: The School Corporation is a member of the Adams Wells Special Services Cooperative (Cooperative). During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the federal money on behalf of all its member schools. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school, the school corporation was responsible for ensuring and providing oversight of the Cooperative. There was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. Cause: The School Corporation's management had not developed an effective system of internal controls that would have ensured compliance with the grant agreements and the earmarking requirements of the Matching, Level of Effort, Earmarking compliance requirement. Effect: The failure to establish an effective internal control system, as well as adequately document costs of federal awards, prevented the determination of the School Corporation's compliance with the earmarking requirements of the Matching, Level of Effort, Earmarking compliance requirement. Questioned Costs: There were no questioned costs identified. Context: The Non-Public Proportionate Share expenditures for the 20611-001-PN01 and 21619-001-PN01 grant awards could not be verified for the individual member schools. Total non-public expenditures were posted as expended. The member school proportionate share expenditures were then determined by applying a budgeted percentage to the total non-public expenditures. These were the amounts reported to IDOE. As such, we were unable to identify if the minimum amount per member school was expended and properly reported to IDOE as required. The School Corporation?s Non-Public Proportionate Share for the 20611-001-PN01 and 21619-001-PN01 grant applications was $1,975 and $0, respectively. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the School Corporation's management establish an effective system of internal controls, as well as appropriately document and identify federal award expenditures to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

CORRECTIVE ACTION PLAN FINDING 2022-005 Contact Person Responsible for Corrective Action: Special Education Cluster/Heidi Sprunger Contact Phone Number: 260-589-3133 Views of Responsible Official: We concur with the finding. The district is working with Special Education Cluster to obtain the corrective action plan that was submitted previously. Description of Corrective Action Plan: We will monitor this with Adams-Wells Special Services Co-op to ensure that the corrective action plan that was submitted will be followed. Anticipated Completion Date: Immediately

FINDING 2022-006 Information on the federal program: Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers or Years (or Other Identifying Numbers): S425D200013, S425D2100013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Significant Deficiency 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 200.313(d)(1) states: "Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), 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." Condition: 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 Equipment and Real Property Management compliance requirement. Cause: Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Equipment and Real Property 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 Equipment and Real Property Management compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: During the audit period, the School Corporation expended $1,685,526 in Economic Stabilization Funds (ESSER) for a building project. Although this project was included in the School Corporation?s capital asset records, it was recorded at the estimated total project cost of $6,256,000. In addition, the School Corporation did not designate the amount of the project that was paid with federal grant funds. The lack of internal controls was limited to the building project. Identification as a repeat finding: No. Recommendation: We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Equipment and Real Property Management compliance requirement. Views of Responsible Officials and Planned Corrective Actions: Management does not agree with the finding and has prepared a corrective action plan.

CORRECTIVE ACTION PLAN FINDING 2022-006 Contact Person Responsible for Corrective Action: Heidi Sprunger Contact Phone Number: 260-589-3133 Views of Responsible Official: The district does not concur with this finding. The reason is as follows: According to the federal grant guidelines you must not pay for any work, services, or products on a project until the work is completed. The $1,685,526 is what was completed within the timeframe of the audit. Asset Control company is who the district uses to complete their capital asset listing every 2 years. At the time of the visit Asset Control was made aware of our project. They had requested that we provide them with the entire project cost. Asset Control wanted to include the full price for insurance coverage because the project would still be ongoing. The district provided documentation of the invoices paid during the audit period to show the amount of the project was paid for federal grant funds at the time of the audit period. Description of Corrective Action Plan: The district has no corrective action plan because the project is now completed and Asset Control company has the full cost of the project list within our assets. Anticipated Completion Date: Immediately

FINDING 2022-007 Information on the federal program: Subject: COVID-19 - Education Stabilization Fund - Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425U Federal Award Numbers or Years (or Other Identifying Numbers): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Finding: Material Weakness, Qualified Opinion 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). . . ." Condition: An effective internal control system was not designed, nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions -? Wage Rate Requirements compliance requirement. 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 pay wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) to their laborers and mechanics. Nonfederal entities are to include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with these requirements and the DOL regulations. This would include a requirement to submit a copy of the payroll and statement of compliance to the entity for each week in which contract work was performed. SOUTH ADAMS SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS July 1, 2020 through June 30, 2022 54. Section III ? Federal Award Findings and Questioned Costs (Continued) FINDING 2022-007 (Continued) Cause: Management had not developed or implemented a system of internal control that would have ensured compliance with the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement Effect: The failure to establish an effective internal control system enabled material noncompliance to go undetected. Questioned Costs: There were no questioned costs identified. Context: The School Corporation had the required clause in the contract and received the payroll; however, the School Corporation did not have adequate policies or procedures to ensure that the required payrolls were submitted and reviewed for each week in which contract work was performed. Identification as a repeat finding: No. Recommendation: We recommended that the School Corporation's management establish internal controls to ensure compliance with the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

CORRECTIVE ACTION PLAN FINDING 2022-007 Contact Person Responsible for Corrective Action: Heidi Sprunger Contact Phone Number: 260-589-3133 Views of Responsible Official: We concur with the finding. The district provided documentation of the email correspondence with the design build project manager. The project manager emailed the district once a month with two separate invoices showing what work had been completed on the project. Once the email was received we had an individual internally check the invoices line for line to confirm that all costs were included in both invoices. Verbal authorization was given to accounts payable to proceed with payment. The district did not have documentation of email verification attesting approval of the invoices. Description of Corrective Action Plan: We have spoken to PSI about a process. We have determined the following, PSI requires subcontractors to submit the certified payroll reports along with their billings. PSI accounting team collects and verifies dates of the CP reports. PSI does not fund the subcontractors? billings until receipt of reports. Once PSI had verified their process the billings will be sent to the district and approval from the Superintendent or Business Manager will be determined before bills will be submitted to the Business Office Manager for submission of payment for the School Board Approval. Anticipated Completion Date: Immediately