Merrillville Community School Corporation

FINDING 2025-001 Subject: Title I Grants to Local Educational Agencies - Special Tests and Provisions - Annual Report Card, High School Graduation Rate Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A220014, S010A230014, S010A240014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Annual Report Card, High School Graduation Rate Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed or implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions - Annual Report, High School Graduation Rate compliance requirement. The School Corporation must report graduation rate data for all public high schools within the School Corporation using the four-year adjusted cohort rate. To remove a student from the cohort, the School Corporation must confirm the reason for the removal in writing. Additionally, required documentation for each removal type must be retained by the School Corporation. Of the 25 students selected for testing, 10 students did not have supporting documentation to substantiate removal of the student from the cohort. 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). . . ." 20 USC 7801(23)(B) states: "To remove a student from a cohort, a school or local educational agency shall require documentation, or obtain documentation from the State educational agency, to confirm that the student has transferred out, emigrated to another country, or transferred to a prison or juvenile facility, or is deceased." INDIANA STATE BOARD OF ACCOUNTS 16 MERRILLVILLE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause Documentation explaining why the students were removed from the cohort was not retained in the student files. Effect 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 proper system of internal controls and develop policies and procedures to ensure proper documentation is maintained for students that are removed from the cohort. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-001 Finding Subject: Title I Grants to Local Educational Agencies – Special Tests and Provisions – Annual Report Card/High School Graduation Rate Contact Person Responsible for Corrective Action: Mike Krutz Contact Phone Number and Email Address: 219-650-5300 x5370, mkrutz@mvsc.k12.in.us Views of Responsible Officials: We concur with the finding. We have taken the audit finding, conclusions and recommendations and created a corrective action plan to correct our processes for the future. Description of Corrective Action Plan: The High School Staff implemented procedures to ensure adequate documentation is received to support a student’s removal/withdrawal from a cohort. The Student Withdrawal Report Form has been updated to include the most current State Withdrawal Codes as well as a high school administrator’s signature for approval. The procedures for removal/withdrawal from a cohort are as follows: 1. The student and/or parent complete the Withdrawal Report Form with the assistance of the attendance secretary. The Withdrawal Checklist Form is started and initialed by the attendance secretary. 2. The student and/or parent meet with an administrator or designee to review the Withdrawal Report Form and complete the Exit Interview Form. The Checklist Form is initialed by administrator or designee signifying completion of this step. 3. The attendance secretary scans the forms into the current student management system. The Checklist Form is initialed by the attendance secretary signifying completion of this step. 4. The original forms are hand delivered to the Registrar who then completes transfer requests and verifications to receiving schools. The Checklist Form is initialed by the Registrar signifying completion of this step. 5. The Registrar upon receiving the original documents hand delivers the Checklist Form to an administrator who reviews and signs the form approving the withdrawal. 6. The original documents are filed in the student’s permanent record folder. 7. Cohorts are reviewed after each trimester by grade level administration and cross referenced with the student management system to check for anomalies. Grade level administration will report their findings to the head principal or designee. Dexter Suggs, Ph.D. Superintendent of Schools "Once a Pirate, Always a Pirate" BOARD OF SCHOOL TRUSTEES Judy C. Dunlap James Donohue DeLena N. Thomas Alex Dunlap III Robert J. Krause President Vice-President Secretary Member Member INDIANA STATE BOARD OF ACCOUNTS 28 MERRILLVILLE COMMUNITY SCHOOL CORPORATION 6701 Delaware Street, Merrillville, IN 46410 (219) 650-5300 FAX (219) 650-5320 www.mvsc.k12.in.us If a student stops attending school and the student/parent does not come in to complete the process, the following procedures are followed: 1. The guidance office secretary attempts (and documents attempts) to contact the parent via phone calls, emails (with read receipt), and certified letters. All paperwork is printed and put in the student file. 2. The guidance office secretary searches the Education ID Portal site to determine if the student is attending another high school. 3. Continual effort is made to contact the parents by the guidance secretary or grade level dean. 4. Once the parent is reached, the above procedures are followed (see step1-7 above). 5. After 3 methods of contact are made (call, email, certified letter), the Student Withdrawal Report is completed and signed by an administrator and withdrawal codes 14 (Unknown/No Show 18+) or 15 (Truancy-Underage No Show) are used. 6. When the school is unable to get in contact with the parent, reports are made to DCS, Merrillville Truancy Court, and the updated procedures for Missing Students/Unknown Location are to be initiated immediately. Additional Step to Corrective Action Plan: We are establishing an annual internal audit, to be completed by central office staff, to ensure that all procedures related to the removal or withdrawal of individuals from a cohort are consistently and properly followed. The internal audit will consist of 10-15 randomly selected withdrawn student’s records. This audit will review documentation, decision-making processes, and compliance with established guidelines to confirm alignment with policy and regulatory requirements. The goal is to promote accountability, maintain program integrity, and identify any areas for improvement or need for additional training. Anticipated Completion Date: June 15, 2026

FINDING 2025-002 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States, COVID-19 - Special Education Grants to States Assistance Listings Numbers: 84.027, 84.027x Federal Award Numbers and Years (or Other Identifying Numbers): 22611-043-PN01, 22611-043-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-002. Condition and Context The School Corporation was a member of the Northwest Indiana Special Education Cooperative (Cooperative). During fiscal year 2023-2024, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 17 MERRILLVILLE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. Due to the timing of the Cooperative's corrective action, the nonpublic expenditures spent did not meet the earmarking requirements for grant award numbers 22611-043-PN01 and 22611-043-ARP. From the beginning of the grant awards until September 2022, total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic school budgeted expenditures. Beginning in September 2022, the Cooperative began tracking expenditures by member school for the nonpublic services. As such, we were unable to identify if the minimum amount per the grant award was expended and properly reported to the IDOE from the beginning of the grant awards through September 2022, as required. The lack of internal controls and noncompliance was isolated to the 22611-043-PN01 and 22611-043-ARP 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." INDIANA STATE BOARD OF ACCOUNTS 18 MERRILLVILLE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause Through inquiry of management, they were unaware of the requirements to track nonpublic proportionate share expenditures directly for each member school. While the Cooperative did implement new processes and procedures to ensure expenditures were tracked by each member school starting in September 2022, most of the grant awards had been allocated to the member schools based on a percentage of the budget. Effect Without the proper implementation of an effectively designed system of internal controls, the Cooperative was unable to track expenditures for nonpublic services for each member school. Consequently, the amounts requested for reimbursement were not supported by actual expenditures but rather a percentage based on the budget per member school. Because of this, expenditures were not accurately reported to the oversight agency. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Cooperative should develop written policies and procedures which would require tracking of actual nonpublic proportionate share expenditures by member school. Documentation should be maintained to show how these expenditures are being tracked to ensure compliance with the earmarking requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-002 Finding Subject: Special Education Cluster (IDEA) - Earmarking Contact Person Responsible for Corrective Action: Meghan Damron Contact Phone Number and Email Address: 219-650-5300, mdamron@mvsc.k12.in.us Views of Responsible Officials: We concur with the finding. We have taken the audit finding, conclusions and recommendations and created a corrective action plan to correct our earmarking for the future. Description of Corrective Action Plan: Although Merrillville Community School Corporation left Northwest Indiana Special Education Cooperative (NISEC) as of July 1, 2024 we continue to track time and effort logs for individuals servicing our non-public students with disabilities. These are housed in the special education office located at Pierce Middle School. Since staff are performing special education duties only, reports are logged semiannually. NISEC has reported that for the 2023-2024 school year the corrective action plan was implemented fully. Anticipated Completion Date: This was completed fully as of July 1, 2024.

2023-002

FINDING 2023-002 Subject: Special Education Cluster - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years: 20611-043-PN01, 21611-043-PN01, 21619-43-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-001. Condition and Context The School Corporation is a member of the Northwest Indiana Special Education Cooperative (Cooperative). During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. 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. However, 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. The Non-Public Proportionate Share expenditures for the 20611-043-PN01, 21611-043-PN01, and 21619-43-PN01 grant awards could not be verified for the individual member schools. The non-public school share funds for all member schools were comingled and the aggregate amount of expenditures was then allocated to the member schools on a percentage basis. These allocations were the amounts reported to the IDOE. As such, we were unable to identify which expenditures were for each school in order to verify the minimum amount per the grant award was expended and properly reported to the IDOE as required. The lack of internal controls and noncompliance were isolated to the 20611-043-PN01, 21611-043-PN01, and 21619-43-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 A proper system of internal controls was not designed by management of the School Corporation. 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 control, 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, it could not be determined if the School Corporation expended their required non-public proportionate share. 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 that the required non-public proportionate share amounts are spent as required. 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 Finding Subject: Special Education Cluster - Earmarking Summary of Finding: Material Weakness, Modified Opinion Contact Person Responsible for Corrective Action: Meghan Damron Contact Phone Number and Email Address: 219-650-5300 x5361 Views of Responsible Officials: We concur with the finding. We have taken the audit finding, conclusions and recommendations and created a corrective action plan to correct our earmarking for the future. Description of Corrective Action Plan: As a member of the Northwest Indiana Special Education Cooperative (NISEC), Merrillville Community School Corporation reported their proportionate share based on a percentage of expenditures, and had successful audits in doing so. When Merrillville Community School Corporation was notified that this process was no longer acceptable, we immediately implemented an internal control process with NISEC which included a detailed reporting of staff work hours for nonpublic schools related to only our school corporation. The report is then reviewed and signed by the NISEC staff working for the nonpublic school and their supervisor. The employee detailed time and effort report are then provided to the NISEC finance department for a second review and signature before being provided to payroll. NISEC payroll then charges the proportionate share to the IDEA Part B grant in the payroll system bi-weekly based on the time and effort report pertinent to just Merrillville Community School Corporation. The time and effort reports are then used to submit the reimbursement request to the Department of Education for Merrillville Community School Corporation’s proportionate share. Additionally, any IDEA Part B nonpublic material expense is broken out in detail with Merrillville Community School Corporation proportionate share for approval by the NISEC finance office prior to vendor payment and the reimbursement request is submitted to the Department of Education. 􀀃􀀃 Anticipated Completion Date: The Northwest Indiana Special Education Cooperatives Chief Financial Officer stopped reporting nonpublic proportionate share expenditures by percentage as of the 2022-2023 school year. An internal control procedure to report nonpublic proportionate share expenditures by detailed time and effort work and expenditures were implemented as of the 2023-2024 school year.

2021-001

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 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. Two construction contracts, totaling $1,543,551 were paid from the COVID-19 - Education Stabilization Fund grant funds during the audit period. Both contracts were tested; however, neither contract contained the required prevailing wage rate clause. Certified payrolls were submitted by the contractor for one of the contracts after the construction was completed for the contract which totaled $1,424,051; however, certified payrolls could not be obtained for the contract which totaled $119,500. 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. (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). . . ." 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. 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 timely 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 the School Corporation's management establish a system of internal controls and include the wage rate requirement clause in construction contracts. In addition, certified payrolls should be obtained as required. 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: COVID-19 Education Stabilization Fund – Special Tests and Provisions – Wage Rate Requirements Summary of Finding: Material Weakness, Modified Opinion Contact Person Responsible for Corrective Action: Debbie Van Slyke Contact Phone Number and Email Address: 219-650-5300 x7563, dvanslyke@mvsc.k12.in.us Views of Responsible Officials: We concur with the finding. We learned of this new requirement after the projects were started and some had already been completed. Once the guidance was released to the school districts we implemented the plan below. Description of Corrective Action Plan: The School Corporation plans to take the following action: 􀁸 Davis Bacon wage rate requirement clauses will be included in all future ESSER funded construction contracts. 􀁸 Certified payrolls will be obtained as required for all future ESSER funded construction projects. Anticipated Completion Date: 􀁸 Davis Bacon wage rate requirement clauses will be included in future ESSER funded construction contracts. A completion date is not available as we do not expect any additional construction projects to be funded through ESSER. 􀁸 Certified payrolls will be obtained as required for ESSER funded construction projects. A completion date is not available as we do not expect any additional construction projects to be funded through ESSER.

FINDING 2023-004 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 and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation paid $1,467,550 from the COVID-19 - Education Stabilization Fund program for two improvement projects which exceeded the School Corporation's capitalization threshold. The improvements were not added to the School Corporation's capital asset listing. Additionally, the School Corporation completed a capital asset inventory as required; however, because material improvements were not included in the capital asset listing, it was determined that the School Corporation did not reconcile differences in the property records as required. 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 200.313(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, 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 sales 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. . . ." 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. 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, improvements purchased were not properly added to the capital asset listing. In addition, a reconcilement between the inventory records and the property records were not completed. Noncompliance with the grant agreement and the compliance requirement could result in the loss of 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 asset records include all assets. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2023-004 Finding Subject: COVID-19 – Education Stabilization Fund – Equipment and Real Property Management Summary of Finding: Material Weakness, Modified Opinion Contact Person Responsible for Corrective Action: Debbie Van Slyke Contact Phone Number and Email Address: 219-650-5300 x7563, dvanslyke@mvsc.k12.in.us Views of Responsible Officials: We concur with the finding. We learned of this new requirement after the inventory was conducted. Once the guidance was released to the school districts we implemented the plan below. Description of Corrective Action Plan: The School Corporation plans to take the following action: 􀁸 The two ESSER funded capital improvements that were cited will be added to the district ESSER capital assets inventory. 􀁸 The two ESSER funded capital improvements that were cited will be added to the school capital asset inventories. ESSER funded HVAC improvements will be added to Iddings school capital asset list. ESSER funded renovation work at the high school will be added to the Merrillville high school capital assets list. 􀁸 Moving forward, additional capital improvements that were funded through ESSER will be added to the district ESSER capital assets inventory as well as school capital asset lists. Anticipated Completion Date: 􀁸 The two ESSER funded capital improvements that were cited will be added to the district ESSER capital assets inventory by February 29, 2024 􀁸 The two ESSER funded capital improvements that were cited will be added to the school capital asset inventories by July 1, 2024. The district will be working through this process with Kroll. The date of inspection is expected to be early June. 􀁸 Additional capital improvements that were funded through ESSER will be added to the district ESSER capital assets inventory as well as school capital asset lists as they are completed.

FINDING 2021-001 Information on the federal program: Subject: Special Education Cluster ? Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.173 Federal Award Numbers and Years: 19611-045-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency, Other Matters 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 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 agreement 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 School Corporation is a member of the Northwest Indiana Special Education Cooperative (Cooperative). During fiscal year 2020-2021, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. 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. However, 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. The Non-Public Proportionate Share expenditures for the 19611-045-PN01 grant award could not be verified for the individual member schools. The non-public school share funds for all member schools were comingled and the aggregate amount of expenditures was then allocated to the member schools on a percentage basis. These allocations were the amounts reported to IDOE. As such, we were unable to identify which expenditures were for each school in order to verify the minimum amount per the grant award was expended and properly reported to IDOE as required. The lack of internal controls and noncompliance was isolated to the 19611-045-PN01 grant award. The School Corporation?s proportionate share amount for the 19611-045-PN01 grant award was $39,852.60. Identification as a repeat finding: 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 OF CURRENT AUDIT FINDINGS June 30, 2021 FINDING 2021-001 Information on the federal program: Subject: Special Education Cluster - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.173 Federal Award Numbers and Years: 19611-045-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency, Other Matters Condition: 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. Context: The School Corporation is a member of the Northwest Indiana Special Education Cooperative (Cooperative). During fiscal year 2020-2021, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. 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. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, and 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. The Non-Public Proportionate Share expenditures for the 19611-045-PN01 grant award could not be verified for the individual member schools. The non-public school share funds for all member schools were comingled and the aggregate amount of expenditures was then allocated to the member schools on a percentage basis. These allocations were the amounts reported to IDOE. As such, we were unable to identify which expenditures were for each school in order to verify the minimum amount per the grant award was expended and properly reported to IDOE as required. The lack of internal controls and noncompliance was isolated to the 19611-045-PN01 grant award. The School Corporation's proportionate share amount for the 19611-045-PN01 grant award was $39,852.60. Views of Responsible Officials and Planned Corrective Actions: As a member of the Northwest Indiana Special Education Cooperative (NISEC), Merrillville Community School Corporation reported their proportionate share based on a percentage of expenditures, and had successful audits in doing so. When Merrillville Community School Corporation was notified that this process was no longer acceptable, we immediately implemented an internal control process with NISEC which included a detailed reporting of staff work hours for nonpublic schools related to only our school corporation. The report is then reviewed and signed by the NISEC staff working for the nonpublic school and their supervisor. The employee detailed time and effort report are then provided to the NISEC finance department for a second review and signature before being provided to payroll. NISEC payroll then charges the proportionate share to the IDEA Part B grant in the payroll system bi-weekly based on the time and effort report pertinent to just Merrillville Community School Corporation. The time and effort reports are then used to submit the reimbursement request to the Department of Education for Merrillville Community School Corporation's proportionate share. Additionally, any IDEA Part B nonpublic material expense is broken out in detail with Merrillville Community School Corporation proportionate share for approval by the NISEC finance office prior to vendor payment and the reimbursement request is submitted to the Department of Education. Responsible party and tlmeline for completion: The Northwest Indiana Special Education Cooperatives Chief Financial Officer stopped reporting nonpublic proportionate share expenditures by percentage as of the 2022-2023 school year. An internal control procedure to report nonpublic proportionate share expenditures by detailed time and effort work and expenditures were implemented as of the 2022-2023 school year.

FINDING 2019-002 Subject: Child Nutrition Cluster - Internal Controls 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): 2017-2018-4600, 2018-2019-4600 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Program Income, Special Tests and Provisions - Paid Lunch Equity 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 Program Income and Special Tests and Provisions - Paid Lunch Equity compliance requirements. Program Income The Assistant Food Service Director entered the School Board approved breakfast and lunch prices into the point of sale system without an oversight or review process in place to ensure that the prices were entered correctly. Special Tests and Provisions - Paid Lunch Equity (National School Lunch Program only) The Administrative Assistant completed the paid lunch equity calculation without an oversight or review process to ensure the accuracy of the calculation. The lack of controls was a systemic issue 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). . . ." Cause The School Corporation's management had not developed or implemented a system of internal controls to ensure compliance with the grant agreement and the compliance requirements listed above. INDIANA STATE BOARD OF ACCOUNTS 16 MERRILLVILLE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 listed above. 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. Recommendation We recommended that the School Corporation's management establish controls to ensure compliance with the grant agreement and the Program Income and Special Tests and Provisions - Paid Lunch Equity compliance requirements. 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 Contact Person Responsible for Corrective Action: Colleen Hostetler Contact Phone Number: 219-650-5363 Views of Responsible Official: We concur with the findings. Description of Corrective Action Plan Program Income When the Assistant Food Service Director enters the board approved meal prices in the point of sale system, she will email the cafeteria managers the board notes to view them. They will look over the new prices in the system and email back to the assistant director that they are correct. These will be kept on file in the food service department. Special Tests Provisions ? Paid Lunch Equity The Administrative Assistant will fill out the Paid Lunch Equity tool, will attach the documentation with it and sign off on it. The Food Service Director will then review and approve the information. Anticipated Completion Date: July 1, 2020

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