South Gibson School CorporationLocal Government

FINDING 2025-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-076-PN01, 22611-076-ARP, 23619-076-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation did not have an effective internal control system in place to ensure compliance with the earmarking requirements and to ensure that the required level of expenditures for nonpublic school students with disabilities was met. The 22611-076-PN01, 23611-076-PN01, 22611-076-ARP, 22619-076-ARP, and 23619-076-PN01 grant awards ended during the audit period. The School Corporation did not have internal controls in place to ensure that it fully spent the required nonpublic proportionate share amounts by the end of the grant award for three of the five grant awards tested. The following schedule shows the total nonpublic proportionate share approved by the Indiana Department of Education (IDOE) for the School Corporation for each grant award compared with the total expenditures posted to the ledger for nonpublic proportionate share. The School Corporation had not spent $25,100 of proportionate share funds by the end of the grant award for all awards ending during the audit period. Total Nonpublic Proportionate Grant Award/ IDOE Approved Nonpublic Share Spent by School Project No. Proportionate Share Corporation Difference 22611-076-PN01 $ 61,782 $ 45,609 $ 16,173 22611-076-ARP 14,833 6,553 8,280 23619-076-PN01 2,359 1,712 647 Totals $ 78,974 $ 53,874 $ 25,100 INDIANA STATE BOARD OF ACCOUNTS 19 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were isolated to the 22611-076-PN01, 22611-076-ARP, and 23619-076-PN01 grant awards. 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: . . . (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." Cause The School Corporation had not developed or implemented an effective system of internal controls, including oversight and review procedures, to ensure that expenditures for the nonpublic proportionate share were monitored and fully utilized within the grant period. Management was aware of the ability to request a waiver for unspent funds but chose not to pursue that option, resulting in the funds remaining unspent. Effect The failure to establish and maintain an effective internal control system prevented the School Corporation from identifying and correcting the unspent balance of required earmarking funds in a timely manner. This resulted in noncompliance with the earmarking requirements for three of the five grant awards tested as the School Corporation failed to expend $25,100 of the required nonpublic proportionate share by the end of the grant awards. Noncompliance with federal program requirements and the lack of internal controls could jeopardize future federal funding and may require the School Corporation to repay the unspent portion to the pass-through agency. INDIANA STATE BOARD OF ACCOUNTS 20 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to track total nonpublic proportionate share by approved grant amounts from the IDOE to ensure proportionate share is being spent by the end of the grant award. 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: 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: 84.245D, 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 INDIANA STATE BOARD OF ACCOUNTS 13 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Construction contracts in excess of $2,000 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 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. 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. There were two contracted vendors paid in excess of $2,000 with the COVID-19 - Education Stabilization Fund grant award during the audit period for construction related projects. Both contracts, totaling $2,296,300, were selected for testing. Neither of the contracts included the required prevailing wage rate clause. In addition, certified payrolls were not submitted to the School Corporation by either contractor. 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). . . ." 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. INDIANA STATE BOARD OF ACCOUNTS 14 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." 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 designed 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. INDIANA STATE BOARD OF ACCOUNTS 15 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 clause nor were certified payrolls obtained by the School Corporation. 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 management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure contracts have language including prevailing wage rates and obtain payroll records to ensure wages are paid properly. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Number and Year (or Other Identifying Number): S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted one ESSER I report, two ESSER II reports, and two ESSER III reports, for a total of five reports. Although the Treasurer prepared the annual data collection report, and the ESSER Program Director or Assistant Superintendent of Schools, both of whom are knowledgeable about the program, reviewed and approved the report prior to submission, the internal control was not effective and did not prevent, or detect and correct, errors prior to submission. INDIANA STATE BOARD OF ACCOUNTS 16 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) All five reports were selected for testing. Neither of the ESSER II annual data reports were accurately supported by the School Corporation's records. The errors identified were as follows:  The ESSER II, Year 1 report, which covered the period of July 1, 2020 to June 30, 2021, reported total expenses of $58,917; however, the School Corporation's ledger for the same period had total expenses of $1,306.  The ESSER II, Year 2 report, which covered the period of July 1, 2021 to June 30, 2022, reported total expenses of $60,441; however, the School Corporation's ledger for the same period had total expenses of $63,565. The lack of effective internal controls and noncompliance were isolated to the S425D210013 grant award. 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 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause A proper system of internal controls was not designed and 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. INDIANA STATE BOARD OF ACCOUNTS 17 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the reports were not supported by the School Corporation's underlying accounting records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all reports submitted on behalf of the COVID-19 - Education Stabilization Fund program are supported by the School Corporation's underlying accounting records. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2019-001 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, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 13 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 Program Income compliance requirement. The School Corporation had not designed or implemented adequate policies and procedures to ensure that the food service program reports were reconciled to program income receipted in the School Lunch fund. The School Corporation did not comply with program income requirements. All receipts from sales, including prepayments, were recorded directly into the School Lunch fund. Periodically, the difference between the beginning and ending balance in the prepaid amount per the food service software was transferred from the School Lunch fund to the Prepaid Lunch fund. The actual amount of program income generated from the food service program was not transferred or recorded properly. This is a systemic problem 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 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 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: . . . (12) Maintain a financial management system as prescribed by the State agency, or FNSRO where applicable; . . ." 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." Cause Management of the School Corporation had not developed a system of internal controls that would have ensured compliance with the Program Income compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 14 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management develop and implement procedures and establish controls to ensure compliance 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.

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