School Town of HighlandLocal Government

FINDING 2023-001 Subject: Special Education Cluster (IDEA) – Earmarking Federal Agency: Department of Education Federal Program: Special Education Preschool Grants Assistance Listing Number: 84.173 Federal Award Number: 22619-043-PN01 Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency 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: A proper system of internal control 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 control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. 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 2022-2023, 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. The Non-Public Proportionate Share expenditures for the 22619-043-PN01 grant award could not be verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the non-public school budgeted expenditures. As such, we were unable to identify if the minimum amount per the grant award was expended and properly reported to IDOE as required. The lack of internal controls was isolated to the 22619-043-PN01 grant award. Identification as a repeat finding: This is a repeat finding from the immediately prior audit report (B60693). The prior audit finding number was 2021-001. Recommendation: We recommended that management of the School Corporation establish a proper system of internal control and develop policies and procedures to ensure non-public proportionate share funds are appropriately allocated to the member school based on expenses charged directly on behalf of the member school. Supporting documentation for these expenses should be retained for audit. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan

FINDING 2023-002 Subject: COVID-19 Education Stabilization Fund – Allowable Costs Federal Agency: Department of Education Federal Program: COVID-19 Education Stabilization Fund Assistance Listing Number: 84.425U Federal Award Number: S425U210013 Compliance Requirement: Allowable Costs Audit Findings: Significant Deficiency Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g) Be adequately documented. h) Cost must be incurred during the approved budget period. Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award. Condition: The School Corporation did not have internal controls in place to ensure that the School Corporation complied with the allowable cost requirements. The School Corporation did not have adequate procedures in place to ensure that the expenditures charged to the grant were accurate and pertained to the Education Stabilization Fund. Cause: A proper system of internal control was not designed by management of the School Corporation that included a thorough review of expenditures charged to the grant. Effect: Without the proper implementation of an effectively designed system of internal controls, the control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs: There was $24,593 of questioned costs identified. Context: The School Corporation requested a transfer of $54,886 from the Education Stabilization Fund to the School Lunch Fund to cover costs incurred for Grab & Go meals as a result of the COVID-19 Pandemic. Upon review of the supporting detail, the actual amount of expenditures for the Grab & Go meals was $30,293, resulting in over reporting of receipts in the amount of $24,593. This was due to a clerical error made by management that was not caught in the review process. Identification as a repeat finding: Not a repeat finding. Recommendation: We recommended that management of the School Corporation establish a proper system of internal control to ensure the appropriate amounts are charged to the grants. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

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: Material Weakness, Qualified Opinion 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 $50,110.09. 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.