Fayette County School Corporation

FINDING 2025-002 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22619-068-PN01, 23611-068-PN01, 23619-068-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation in order to ensure compliance with the earmarking requirement of the Special Education Cluster (IDEA) during the audit period. The School Corporation did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met as indicated on the grant agreements during the audit period. The Non-Public Proportionate Share expenditures recorded for the 22619-068-PN01, 23611-068- PN01, and 23619-068-PN01 were less than the total amount required for each of these respective grants. The appropriations reports provided by the School Corporation indicated that the total expenditures paid for these grant funds was not sufficient for meeting the nonpublic proportionate share requirement. The lack of internal controls and noncompliance were isolated to the 22619-068-PN01, 23611-068-PN01, and 23619-068-PN01 grant awards. The minimum earmarking requirement for the 22619-068-PN01, 23611-068-PN01, and 23619-068-PN01 grant awards was $1,405, $68,728, and $982, respectively. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 18 FAYETTE COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools and facilities, 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 or facilities within its boundaries, is to the total number of students with disabilities of the same age range." Cause The School Corporation is the fiscal agent of a Special Education Cooperative (Cooperative) that manages and operates the special education program and oversees the majority of the federal compliance requirements. The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. A method to track expenditures to ensure earmarking requirements were complied with had not been implemented. Additionally, the Cooperative did not obtain a waiver from the Indiana Department of Education for the 22619-068-PN01, 23611-068-PN01, and 23619-068-PN01 grant awards. Effect The failure to establish an effective internal control system placed the School Corporation in noncompliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Noncompliance with the grant agreement or the compliance requirement could result in the loss of federal funds to the School Corporation. Questioned Costs There were no known questioned costs identified. Recommendation We recommended that the School Corporation's management establish internal controls to monitor the Matching, Level of Effort, Earmarking compliance requirement periodically to ensure compliance with the earmarking compliance requirements by the end of the grant period. This includes meeting with the Cooperative periodically to monitor and track progress towards meeting the required nonpublic proportionate share amounts. Views of Responsible Officials Management agrees with the finding and has prepared a corrective action plan.

FINDING 2025-002 Finding Subject: Special Education Cluster (IDEA) -- Earmarking Contact Person Responsible for Corrective Action: Tina Smith Contact Phone Number and Email Address: (765) 825-2178 tlsmith@fayette.k12.in.us INDIANA STATE BOARD OF ACCOUNTS 26 2 Views of Responsible Officials: We concur with this finding. Description of Corrective Action Plan: It is increasingly difficult to get our non-public schools to spend their grant money. However, to address the internal control finding, we will strengthen subrecipient monitoring by implementing clearer expenditure timelines for subrecipient entities associated with the grant to ensure awarded funds are expended properly and in a timely manner in accordance with grant requirements. We will also provide additional technical assistance and guidance regarding allowable costs and conduct more frequent financial reviews throughout the grant cycle. These measures will promote timely use of funds, improve compliance with grant requirements, and reduce the risk of unspent or improperly managed grant resources in future periods. Anticipated Completion Date: A new procedure is in place effective February 2026.

FINDING 2025-003 Subject: Head Start Cluster - Equipment and Real Property Management Federal Agency: Department of Health and Human Services Federal Program: Head Start Assistance Listings Number: 93.600 Federal Award Numbers and Years (or Other Identifying Numbers): 05CH012250-01a, 05CH012250-02 Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation designed a system of internal controls; however, it was not properly implemented to ensure compliance with requirements related to the grant agreement and the Equipment and Real Property Management compliance requirement. A property record or capital asset listing is required to be maintained for all equipment purchased with the Head Start grant award to ensure adequate safeguards are in place to prevent loss or damage of items. The School Corporation used federal funds in the amount of $224,077 to purchase two buses. The equipment was included in the capital asset listing of the School Corporation; however, it did not include the proper identifying information. The School Corporation's capital asset listing did not include the following required information:  The use and condition of the property.  The percentage of federal participation in the project costs for the federal award under which the property was acquired.  Source of funding for the property (including the federal award identification number (the FAIN)). 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 FAYETTE COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.313(d) states in part: ". . . (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. . . ." Cause A proper system of internal controls was not designed and implemented by management of the School Corporation to ensure that assets purchased using federal dollars were added to the School Corporation's capital asset listing with all required information. Effect The failure to establish an effective system of internal controls placed the School Corporation in noncompliance with the grant agreement and the Equipment and Real Property Management compliance requirement. The School Corporation's capital asset listing did not include all information required for assets acquired with federal funds. Noncompliance with the grant agreement and the compliance requirement could result in the repayment of federal funds. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish internal controls to ensure that equipment purchased with federal funds are added to the inventory listing with the required information necessary for compliance with requirements as outlined in the grant agreements and Compliance Supplement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-003 Finding Subject: Head Start Cluster – Equipment and Real Property Management Contact Person Responsible for Corrective Action: Tina Smith Contact Phone Number and Email Address: (765) 825-2178 tlsmith@fayette.k12.in.us Views of Responsible Officials: We concur with this finding. Description of Corrective Action Plan: The Treasurer will work closely with Ad-Tech to ensure that all required information is reported accurately. Anticipated Completion Date: The capital assets inventory list will be updated to include the above required information beginning with the 2025-2026 Inventory Report.

FINDING 2023-003 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 Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Modified Opinion Condition and Context Construction contracts in excess of $2,000 that are financed by federal assistance funds must 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 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. The School Corporation had not designed nor implemented a system of internal controls to ensure that construction contracts in excess of $2,000 paid from federal grant funds included a prevailing wage rate clause. Two construction contracts, with expenditures totaling $403,660, were paid from the COVID-19 - Education Stabilization Fund grant awards during the audit period. Both contracts were tested. Neither contract contained the required prevailing wage rate clause. Additionally, no certified weekly payrolls were obtained for the two construction projects. 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: INDIANA STATE BOARD OF ACCOUNTS 20 FAYETTE COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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). . . ." 29 CFR 5.5 states in part: "(a) The Agency head shall cause or require the contracting officer to insert in full in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts listed in § 5.1, the following clauses . . . (1) Minimum wages. (i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. . . . (3) Payrolls and basic records . . . (ii) (A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals. Instead the payrolls shall only need to include an individually identifying number for each employee (e.g., the last four digits of the employee's social security number). The required weekly payroll information may be submitted in any form desired. Optional Form WH-347 is available for this purpose from the Wage and Hour Division Web site at http://www.dol.gov/esa/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. . . ." INDIANA STATE BOARD OF ACCOUNTS 21 FAYETTE COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200 Appendix II states in part: "In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non- Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, 'Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction'). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include 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 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, construction contracts entered into did not contain the required wage rate requirements clauses nor were certified payrolls obtained as required. 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 include the required wage rate requirement clause in construction contracts in excess of $2,000. In addition, certified payrolls should be obtained for each week in which work is completed. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2023 003 Finding Subject: Material Weakness and Modified Opinion COVID 19 Education Stabilization Fund – Special tests and provisions regarding wage rate requirements. Summary of Finding: FCSC was not in compliance with the Davis Bacon Act, which requires contractors and subcontractors to supply payroll/wage rate information to the contractee if the services provided exceed $2,000.00 and are paid with federal funds. Contact Person Responsible for Corrective Action: Randy Harris Contact Phone Number and Email Address: (765) 825 2178 rharris@fayette.k12.in.us Views of Responsible Officials: We concur with this finding. Description of Corrective Action Plan: We have learned from our error. Going forward, FCSC will be more diligent about understanding the parameters of grant guidelines and reporting. If we have any future contracts that are in excess of $2,000.00 and are to be paid with federal monies, FCSC will be sure to obtain the wage records from the contractor. We can note in the bid request that Davis Bacon rules apply. Anticipated Completion Date: A new procedure is in place effective February 2024.