Tell City-Troy Township School Corporation

FINDING 2025-002 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 Number: 84.425U Federal Award Number and Year (or Other Identifying Number): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system, which would include segregation of duties, was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement. 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 did not have policies and procedures in place to ensure that contractors were paid prevailing wage rates for contracts in excess of $2,000 that were paid from federal grant funds. The School Corporation contracted with a company for a roofing project on an elementary school building. While the contract did contain the required prevailing wage language, the School Corporation used an architect firm to manage the payments to the contractor. The architect firm only submitted 4 of the 11 certified payrolls to the School Corporation for review. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 18 TELL CITY-TROY TOWNSHIP SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 29 CFR 5.5 states in part: "(a) Required contract clauses. The Agency head will cause or require the contracting officer to require the contracting officer to [sic] insert in full, or (for contracts covered by the Federal Acquisition Regulation (48 CFR chapter 1)) by reference, 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 laws referenced by § 5.1, the following clauses . . . (1) Minimum wages— (i) Wage rates and fringe benefits. All laborers and mechanics employed or working upon the site of the work (or otherwise working in construction or development of the project under a development statute), 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 basic hourly 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) Records and certified payrolls— (ii) Certified payroll requirements— (A) Frequency and method of submission. The contractor or subcontractor must submit weekly, for each week in which any DBA- or Related Acts-covered work is performed, certified 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 certified payrolls to the applicant, sponsor, owner, or other entity, as the case may be, that maintains such records, 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. . . . INDIANA STATE BOARD OF ACCOUNTS 19 TELL CITY-TROY TOWNSHIP SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 The School Corporation was inexperienced with managing federal awards to which the wage rate requirements apply and was, therefore, unaware of the requirement to obtain and review all certified payrolls from the contractor. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of preventing, or detecting and correcting, noncompliance. As a result, the School Corporation did not comply with the wage rate requirements of the federal award and did not obtain and review all certified payrolls submitted to the project architect by the contractor. Accordingly, the School Corporation could not have verified that the contractor paid the required prevailing wage rates. 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 compliance with the wage rate requirements. The School Corporation's system should be designed to ensure that the School Corporation receives and reviews all certified payrolls for construction contracts paid with federal dollars. 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: Child Nutrition Cluster - Special Tests and Provisions - Verification of Free and Reduced Price Applications (NSLP) Federal Agency: Department of Agriculture Federal Program: National School Lunch Program Assistance Listings Number: 10.555 Federal Award Number and Year (or Other Identifying Number): FY 2022/2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Verification of Free and Reduced Price Applications (NSLP) Audit Finding: Material Weakness 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 with the Special Tests and Provisions - Verification of Free and Reduced Price Applications (NSLP) compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 21 TELL CITY-TROY TOWNSHIP SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation designed a control that one employee would determine the number of applications required to be verified, select the required applications, request the income verification documentation for each application, and finally perform the verifications to determine if changes in eligibility status were warranted. A second employee would then review the verifications performed to ensure that the determinations were accurate prior to submission of the Verification Summary Report. In order to substantiate that the internal control was properly implemented and operating effectively, the three applications required to be verified by the School Corporation for fiscal year 2022-2023 were selected for testing. None of the applications contained evidence to indicate that the identified internal control was implemented as designed. The lack of internal controls was isolated to 2022-2023. 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). . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. INDIANA STATE BOARD OF ACCOUNTS 22 TELL CITY-TROY TOWNSHIP SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 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 Number: 84.425D Federal Award Number and Year (or Other Identifying Number): S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management 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 with the Equipment and Real Property Management compliance requirement. A property record or capital asset listing would include the following for each asset: a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (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 sale price of the property. The property record or capital asset listing should be maintained for assets purchased that exceed the School Corporation's capitalization threshold. The School Corporation utilized COVID-19 - Education Stabilization Fund (ESF) grant awards to purchase equipment throughout the audit period, including, but not limited to, the following: full serving lines with cashier stations, serving lines with flatware carts, milk coolers, dishwashers, and a double stack convection oven. The total equipment purchased was $300,131. All equipment was properly added to the capital asset listing; however, the following attributes were missing from the listing: the source of the funding (including the federal award identification number), who holds the title, percentage of federal participation in the project costs for federal awards under which the property was acquired, the condition of the property, and, if applicable, the disposition data. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 23 TELL CITY-TROY TOWNSHIP SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d)(1) states: "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." 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 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, assets purchased with federal dollars, Education Stabilization Funds, were not properly added to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal funds were used to acquire the asset, nor were any discrepancies in the records reconciled. 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 asset records include all the necessary information. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2021-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2019/2020, FY2020/2021 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2019-001. 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 Procurement and Suspension and Debarment compliance requirement. The School Corporation did not properly procure purchases of food which exceeded the simplified acquisition threshold of $150,000. For the one vendor that exceeded the simplified acquisition threshold, the School Corporation did not award a contract. In addition, for one of two small purchase vendors tested, the School Corporation did not obtain price or rate quotes from an adequate number of sources. 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 200.318 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 200.320 states in part: "The non-Federal entity must use one of the following methods of procurement. . . . (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. . . . (c) Procurement by sealed bids (formal advertising). Bids are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bid method is the preferred method for procuring construction, if the conditions in paragraph (c)(1) of this section apply. . . . (d) Procurement by competitive proposals. The technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed price or cost reimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids . . ." Cause Management had not established a system of internal control that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2021-002 Subject: Special Education Cluster (IDEA) - Level of Effort - Maintenance of Effort Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Number and Year (or Other Identifying Number): 20611-009-PN01 Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to grant agreement and the level of effort - maintenance of effort (MOE) requirements of the Matching, Level of Effort, Earmarking compliance requirement. The compliance standard calculation for fiscal year 2018-2019 was submitted on the FY 2020 Part B 611 Application, Part 2. Amounts entered for the calculation should be based on actual expenditures derived from the prepared financial statement. However, the amounts reported were based on contracted amounts for 2018-2019 which were used to project the salary and benefit expenses reported in the calculation. The lack of effective internal controls and noncompliance were isolated to the 20611-009-PN01 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). . . ." 34 CFR 300.203(b) states: "Compliance standard. (1) Except as provided in ?? 300.204 and 300.205, funds provided to an LEA under Part B of the Act must not be used to reduce the level of expenditures for the education of children with disabilities made by the LEA from local funds below the level of those expenditures for the preceding fiscal year. (2) An LEA meets this standard if it does not reduce the level of expenditures for the education of children with disabilities made by the LEA from at least one of the following sources below the level of those expenditures from the same source for the preceding fiscal year, except as provided in ?? 300.204 and 300.205: (i) Local funds only; (ii) The combination of State and local funds; (iii) Local funds only on a per capita basis; or (iv) The combination of State and local funds on a per capita basis. (3) Expenditures made from funds provided by the Federal government for which the SEA is required to account to the Federal government or for which the LEA is required to account to the Federal government directly or through the SEA may not be considered in determining whether an LEA meets the standard in paragraphs (b)(1) and (2) of this section." Cause Management had not developed a system of internal control that would have ensured compliance with the MOE requirements of the Matching, Level of Effort, Earmarking compliance requirement. Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the MOE requirements of the Matching, Level of Effort, Earmarking 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 establish an effective system of internal control to ensure compliance and comply with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. Response to Management's Views Although we agree that the School Corporation has provided sufficient supporting documentation for the method in which it calculated Maintenance of Effort for the FY2020 grant, we still contend that actual expenditures derived from the School Corporation's financial records must be used when calculating Maintenance of Effort and that any other method would cause some variance.

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): FY 2017/18, FY 2018/19 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 13 TELL CITY-TROY TOWNSHIP SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2017-004. 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 purchased food and supply items from one vendor with total purchases that exceeded the simplified acquisition threshold of $150,000 during fiscal year 2017-2018 and 2018-2019 without soliciting bids and awarding contracts. The School Corporation did not verify that the vendors were not suspended or debarred or otherwise excluded from or ineligible for participation in federal assistance programs prior to conducting business with them. The internal controls and compliance issues for the simplified acquisitions and suspension and debarment were systemic throughout the audit period. Approximately 53 percent of the total grant fund disbursements were Uniform Guidance vendor procurements. The noncompliance for simplified acquisition purchases were 58 percent of the procurement expenditures. The noncompliance for suspension and debarment were two of the seven vendors during 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 200.320 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 micropurchase threshold (? 200.67 Micro-purchase). To the extent practicable, the non-Federal entity must distribute micro-purchases equitably among qualified suppliers. Micropurchases may be awarded without soliciting competitive quotations if the non-Federal entity considers the price to be reasonable. INDIANA STATE BOARD OF ACCOUNTS 14 TELL CITY-TROY TOWNSHIP SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. (c) Procurement by sealed bids (formal advertising). Bids are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bid method is the preferred method for procuring construction, if the conditions in paragraph (c)(1) of this section apply. . . ." 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 had not developed a system of internal controls that would have ensured that the School Corporation complied with the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish controls enabled material noncompliance to occur. Noncompliance with the compliance requirements could have resulted in the loss of federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation establish controls to ensure compliance and comply with the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

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