Hamilton Heights School CorporationHigher Education

FINDING 2020-001 Subject: Special Education Cluster (IDEA) - Equipment Management 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): 18611-023-PN01, 19611-023-PN01, 20611-023-PN01, 18619-023-PN01, 19619-023-PN01, 20619-023-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion 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 equipment requirements of the Equipment and Real Property Management compliance requirement. The School Corporation is a member of the Hamilton-Boone-Madison Special Services Cooperative (Cooperative). The Cooperative operated the special education programs on behalf of the School Corporation and managed the special education grant funds. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the Equipment and Real Property Management compliance requirement. The School Corporation did not have adequate procedures in place to ensure that the Cooperative complied with the equipment requirements. The Cooperative did not have adequate procedures in place to ensure that equipment purchased with grant funds were properly recorded and maintained in their equipment records. The Cooperative also did not maintain records for the disposition of equipment purchased with federal grant funds. The lack of internal controls and noncompliance were isolated to fiscal year 2019-2020. 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 states in part: ". . . (b) . . . Other non-Federal entities must follow paragraphs (c) through (e) of this section. . . . (d) 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. . . ." Cause The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the equipment requirements. Effect The failure to provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the Equipment and Real Property Management compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish effective internal controls to ensure compliance and comply with the Equipment and Real Property 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 2020-002 Subject: Special Education Cluster (IDEA) - Procurement 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): 14217-025-PN01, 18611-023-PN01, 19611-023-PN01, 18619-023-PN01, 19619-023-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2018-002. Condition and Context The School Corporation is a member of the Hamilton-Boone-Madison Special Services Cooperative (Cooperative). The Cooperative operated the special education programs on behalf of the School Corporation and managed the special education grant funds. The grant agreements for the federal programs were between the Indiana Department of Education (IDOE) and each member school corporation of the Cooperative. Because the grant agreements were between the IDOE and the School Corporation, the School Corporation was ultimately responsible for compliance with the Procurement and Suspension and Debarment compliance requirement. The written procurement policies and procedures of the Cooperative, the fiscal agent, did not comply with the procurement standards for fiscal year 2018-2019. The written policies did not specify avoiding the acquisition of unnecessary or duplicative items, or that all solicitations should incorporate a description of the technical requirements of the procurement. The fiscal agent also had a policy to use local geographical preferences in the evaluation of bids or proposals. The School Corporation did not establish effective internal controls over purchases that fell within the small purchase requirement, allowing noncompliance to go undetected. Price or rate quotes were not obtained from an adequate number of qualified sources and full and open competition was not provided. The lack of effective internal controls and noncompliance were isolated to 2018-2019. 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 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal entity must use one of the following methods of procurement. . . . (a) 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." 2 CFR 200.319(b) states in part: "The non-Federal entity must conduct procurements in a manner that prohibits the use of statutorily or administratively imposed state, local, or tribal geographical preferences in the evaluation of bids or proposals, except in those cases where applicable Federal statutes expressly mandate or encourage geographic preference. . . ." Cause The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the procurement requirements. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the procurement requirements 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 effective internal controls to ensure compliance and comply with 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.

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