Paoli Community School CorporationLocal Government

FINDING 2025-002 Subject: Child Nutrition Cluster - Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed and 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 related to the Procurement and Suspension and Debarment compliance requirement. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. It is the School Corporation's policy that they will either require a certification from the vendor or check the exclusion list prior to entering a covered transaction. The School Corporation entered into three covered transactions during the audit period, and it was unable to provide evidence that it followed its policy for two of those transactions. The total purchases made from these two vendors totaled $93,895. INDIANA STATE BOARD OF ACCOUNTS 15 PAOLI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance was only noted in the first year of 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 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The School Corporation's management failed to properly design and implement an internal control system that would have ensured that its policy over the Procurement and Suspension and Debarment compliance requirement was adhered to during the audit period. Effect The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could have resulted in the loss of federal funds to the School Corporation. Additionally, the School Corporation could have made payment to a vendor that was suspended or debarred. Payments to such vendors are unallowable. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 16 PAOLI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. The system should be designed to ensure that vendors are not suspended or debarred, or otherwise excluded, prior to the School Corporation entering into a covered transaction. 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 Subject: COVID-19 - Education Stabilization Fund - Reporting 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): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation was required to submit annual data reports to the Indiana Department of Education (IDOE) 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 two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports. The reports were prepared by one employee without an oversight or review process in place to prevent, or detect and correct, errors. Furthermore, the data reported on four of the six reports could not be traced back to underlying records; therefore, the accuracy and completeness of the reports could not be verified. The following errors were identified: ESSER I, Year 2 Report The key line item, "Operational Continuity and Other Allowed Uses - Personnel Services - Salaries," was overstated by $20,648. ESSER I, Year 3 Report The key line item, "Addressing Physical Health and Safety Uses - Personnel Services - Salaries," was understated by $14,685. The key line item, "Addressing Physical Health and Safety Uses - Supplies," was understated by $31,510. ESSER II, Year 2 Report The key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Purchased Professional and Technical Services," was understated by $35,967. ESSER III, Year 2 Report The key line item, "Addressing Physical Health and Safety (exclusive of amount expended toward required set-aside to address learning loss)," was understated $2,200. INDIANA STATE BOARD OF ACCOUNTS 20 PAOLI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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 by management of the School Corporation which includes a 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, reported amounts could not be traced back to the underlying records. INDIANA STATE BOARD OF ACCOUNTS 21 PAOLI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 funds are accurate and complete. 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 - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children CFDA Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2018, FY2019 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context Service Center The School Corporation is a member of the Wilson Education Center (Service Center). During the fiscal years 2017-2018 and 2018-2019, the Service Center solicited, evaluated and awarded bids for bread, milk, and other products on behalf of its members. There was inadequate oversight performed by the School Corporation of the procurement and suspension and debarment procedures of the Service Center. 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 Procurement and Suspension and Debarment compliance requirement. Procurement The bids for bread and milk were originally awarded for fiscal year 2016-2017, and each contract included a clause stating that the contract could be extended for three additional twelve (12) month periods by mutual written agreement. The Service Center could not provide documentation of the mutually agreed upon contracts for the extensions of the bread bid for the 2017-2018 or 2018-2019. The Service Center also could not provide documentation of the mutually agreed upon contract for the extension of the milk bid for 2018-2019. Suspension and Debarment The bids for bread and milk were originally awarded for fiscal year 2016-2017, and each contract included a clause stating that the contract could be extended for three additional twelve (12) month periods by mutual written agreement, along with a clause noting that the vendor was not suspended or debarred. The Service Center could not provide documentation of the mutually agreed upon contracts for the extensions of the bread bid for 2017-2018 or 2018-2019. The Service Center also could not provide documentation of the mutually agreed upon contract for the extension of the milk bid for 2018-2019. Therefore, the Service Center did not provide documentation that procedures were performed to verify the vendors were not suspended or debarred prior to entering into covered transactions with these vendors. The lack of controls and noncompliance were systemic issues throughout the audit period. School Corporation 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 Procurement and Suspension and Debarment compliance requirement. Procurement The School Corporation utilized two vendors, who were not part of the Service Center, for which the total purchases for 2017-2018 and 2018-2019 were within the small purchase threshold ($3,500-$150,000) and the School Corporation did not obtain quotes or maintain documentation for the rationale of selecting each vendor for food purchases. The lack of 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 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 200.318(i): "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.? 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 180.300 states: "When covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person you enter into a; or (c) Adding a clause or condition to the covered transaction with that person.? 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 compliance requirement listed above. Effect The failure to establish an effective internal control system placed the School Corporation in noncompliance with the grant agreement and the compliance requirement 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, to ensure compliance with the grant agreement and compliance requirements identified above. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2019-002 Subject: Special Education Cluster (IDEA) - Internal Controls 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 (or Other Identifying Numbers): 14216-054-PN01, 14217-054-PN01, 18611-054-PN01, 18619-054-PN01, 45716-054-PN01, 45717-054-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Finding: Material Weakness Condition and Context 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 Matching, Level of Effort, Earmarking compliance requirement. One employee prepared the maintenance of effort calculation without an internal control system to verify the calculation for accuracy. There was no documentation or other evidence of an oversight, review, or approval process to ensure that the School Corporation was in compliance with the level of effort requirements of the grant. The lack of internal controls was isolated to fiscal year 2017-2018. 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). . . ." Cause Management of the School Corporation had not developed a system of internal controls that segregated key functions. 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 requirement 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 to ensure compliance with the grant agreement and compliance requirement identified above. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2019-003See notes to FE tab) Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment 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 (or Other Identifying Numbers): 14216-054-PN01, 14217-054-PN01, 18611-054-PN01, 19611-054-PN01, 18619-054-PN01, 19619-054-PN01, 45716-054-PN01, 45717-054-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Matter Weakness, Other Matters Repeat Finding A similar finding also appeared in the immediately prior audit report. The prior audit finding number was 2017-005. Condition and Context 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 Procurement and Suspension and Debarment compliance requirement. The School Corporation is a member of the South Central Area Special Education Cooperative (Cooperative). During the fiscal years 2017-2018 and 2018-2019, the Cooperative spent the federal money on behalf of all its members and there was inadequate oversight performed by the School Corporation of the procurement and suspension and debarment practices of the Cooperative. Procurement The Cooperative did not obtain price or rate quotations from an adequate number of qualified sources, and full and open competition was not provided for purchases that fell within the small purchases requirement. Documentation was not provided to show that consideration was given to the reasonableness of prices of purchases made, and full and open competition was not provided for purchases that fell within the micro-purchases requirement. The Cooperative had a written procurement policy, however it did not reflect the required State and Federal laws and regulations. The Cooperative did not maintain written standards of conduct covering conflicts of interest concerning employees engaged in the selection, award and administration of contracts supported by Federal awards. Suspension and Debarment The Cooperative's Director signed the Application and Assurance Plan as a condition of Federal assistance, which stated that the Cooperative would verify that contractors were not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded by any federal agency or by any department, agency or political subdivision of the State of Indiana. However, the School Corporation did not have procedures in place to monitor that the Cooperative verified that the vendors were not suspended or debarred or otherwise excluded from or ineligible for participation in federal assistance programs prior to entering into a covered transaction with them. The lack of supporting documentation within small purchases requirement of price or rate quotations were systemic issues throughout the audit period. The lack of an adequate written procurement policy, and lack of a written conflict of interest policy were pervasive throughout the audit period. There were five contracts during 2017-2018 and two contracts during 2018-2019 that exceeded $25,000; however, the Cooperative could not provide documentation to show that a verification was performed in order to verify that the vendor was not suspended or debarred prior to entering into covered transactions with these vendors. The lack of controls 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 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 200.318 states in part: "(a) 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. . . ." (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.318(c)(1) states in part: "The non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. . . ." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. (a) Procurement by micro-purchases. Procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (? 200.67 Micro-purchase). To the extent practicable, the non-Federal entity must distribute micro-purchases equitably among qualified suppliers. Micro-purchases may be awarded without soliciting competitive quotations if the non-Federal entity considers the price to be reasonable. (b) 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 180.300 states: "When covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (d) Checking SAM Exclusions; or (e) Collecting a certification from that person you enter into a; or (f) Adding a clause or condition to the covered transaction with that person.? Cause The School Corporation?s had not designed or implemented an effective internal control system for the compliance requirement listed above. Effect The failure to establish an effective internal control system placed the School Corporation in noncompliance with the grant agreement and the compliance requirement listed above. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish controls to ensure compliance with the grant agreement and the compliance requirement listed above. 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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