Marion Community Schools

Information on the federal program: Subject: Education Stabilization Fund – Internal Controls Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Federal Award Numbers: S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness Criteria: 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, and 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. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." Condition: 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 Equipment and Real Property Management Requirements compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. 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. 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. Context: For the 4 sample items tested, the acquisitions were not reported on the capital asset listing for the School Corporation as of June 30, 2025. For 3 of the sample items, the School Corporation expended $8,378,388 on building renovations which were charged to the ESSER III (84.425U) and ESSER II (84.425D) grant awards in the current audit period and prior audit period. For the other sample item, the School Corporation expended $17,513 for playground equipment that was charged to the ESSER III grant in the current period. Additionally, we noted the School Corporation’s capital asset listing did not contain all the required information, including the source of funding for the property, outlined in the criteria above. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2023-003. Recommendation: We recommend the School Corporation update the capital asset listing at least annually to include all equipment and real property acquisitions and review for potential capital asset dispositions. Additionally, we recommend the School Corporation update the capital asset listing to include all the required information, including the source of funding for the property, outlined in the criteria above. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2023-001 Information on the federal program: Subject: Title I Grants to Local Education Agencies - Internal Controls Federal Agency: Department of Agriculture Federal Program: Title I Grants to Local Education Agencies Assistance Listing Number: 84.010A Federal Award Numbers and Years (or Other Identifying Numbers): S010210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Significant Deficiency Criteria: 2 CFR section 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). . . ." Condition: 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 activities allowed or unallowed and allowable costs/cost principle compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. 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. 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: $48. Context: During testing of 40 payroll transactions for allowability, we noted 3 instances where the amount paid to the same employee did not agree to the employee’s approved contract amount. The amount charged to the grant for each payroll period was $16 more than what the same employee’s contract stated. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the School Corporation establish a documented, primary review of all time cards and payroll registers to ensure amounts charged to the grants agree to the approved contracts and rate schedules. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2023-002 Information on the federal program: Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listing Number: 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Material Noncompliance, Qualified Opinion Criteria: 2 CFR section 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). . . ." 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… FINDING 2023-002 (Continued) (3)(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.. . .” Condition: 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 Special Tests and Provisions – Wage Rate Requirements compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. 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 Special Tests and Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation did not obtain the weekly payroll reports certifications from a construction company that was improving the building. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements. Additionally, the School Corporation did not have a contract with the company that included clauses for the federal wage rate requirements. The sample item cost paid in the audit period was $5,847,449 for energy conservation improvements. Identification as a repeat finding: No. Recommendation: We recommend the School Corporation implement a formal process to ensure the required weekly payroll reports certifications are collected and reviewed to ensure compliance with the wage rate requirements. FINDING 2023-002 (Continued) Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2023-003 Information on the federal program: Subject: Education Stabilization Fund (ESSER) – Internal Controls Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment Audit Finding: Significant Deficiency Criteria: 2 CFR 200.313(d) states in part: "The non-Federal entity must: (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, and 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. Condition: 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 Equipment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. 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. 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. Context: For the 2 equipment purchases sampled, the School Corporation did not add the equipment purchases to the capital asset listing. Identification as a repeat finding, if applicable: No. FINDING 2023-003 (Continued) Recommendation: We recommended that the School Corporation ensure proper inclusion of all purchased equipment within the School Corporation’s capital asset ledger. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2019-002 Subject: Title I Grants to Local Educational Agencies, Special Education Cluster (IDEA), and Head Start - Internal Controls Federal Agencies: Department of Education, Department of Health and Human Services Federal Programs: Title I Grants to Local Educational Agencies, Special Education Grants to States, Special Education Preschool Grants, and Head Start CFDA Numbers: 84.010, 84.027, 84.173, 93.600 Federal Award Numbers and Years (or Other Identifying Numbers): 09/30/17, 09/30/18, 09/30/19, SIG 09/30/17, S010A170014, S010180014, PN 14216-019-PN01, PN 14217-019-PN01, PN 18611-019-PN01, PN 19611-019-PN01, PN 45716-019-PN01, PN 45717-019-PN01, PN 18619-019-PN01, PN 19619-019-PN01, 05CH010361-02, 05CH010361-03, 05CH010361-04 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Significant Deficiency 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 following compliance requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles. The School Corporation did not have adequate controls in place related to payroll disbursements. A proper system of oversight or review was not in place to ensure that only allowable activities and allowable costs were charged to the appropriate fund. Payroll was processed and completed without an oversight or review process to ensure payroll was properly calculated and charged to the appropriate fund. The Payroll Claim Listing report summarized by fund was reviewed and approved each pay period, but this report did not provide any detail for the employees who were paid from those funds. Additionally, the controls established for payroll disbursements for the Special Education Cluster (IDEA) programs were not properly implemented. The attendance register approving contracted teachers did not always include all contracted teachers, and time cards for hourly employees were not always approved by the appropriate official (School Building Principal or Program Director). The lack of controls was a systemic issue throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 17 MARION COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause Management had not developed and implemented a system of internal control that segregated key functions. Effect The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. 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 a system of internal control, including segregation of duties, related to the grant agreement and compliance requirements listed above. An internal control system, including segregation of duties, should be designed and operate effectively to provide reasonable assurance that material noncompliance with the grant agreement or a compliance requirement of a federal program will be prevented, or detected and corrected, on a timely basis. In order to have an effective internal control system, it is important to have proper segregation of duties. This is accomplished by making sure proper oversight, reviews, and approvals take place and to have a separation of functions over certain activities related to the program. The fundamental premise of segregation of duties is that an individual or small group of individuals should not be in a position to initiate, approve, undertake, and review the same activity. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2019-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants CFDA Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): PN 14217-019-PN01, PN 45716-019-PN01, PN 45717-019-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking 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 Matching, Level of Effort, and Earmarking compliance requirement. The School Corporation did not have effective internal controls in place to ensure that the School Corporation expended the amount necessary to meet earmarking requirements. The School Corporation was required to spend at least an amount that was the same proportion of the total sub-grant as the number of non-public school students with disabilities was to the total of student with disabilities of the same age range within the School Corporation's boundaries. The School Corporation did not meet earmarking requirements for the Preschool grant award PN 45716-019-PN01, which was awarded in fiscal year 2015-2016. A separate account line was maintained in the financial records to specifically identify services for non-public schools. Based on information reported in the School Corporation's financial records, non-public school expenditures were $1,602 less than the required amount to be set aside according to the 2015/2016 grant application. Additionally, the 2018-2019 financial records included expenditures related to the 2016-2017 grant award that were not related to non-public school services under this same account line. The School Corporation did not maintain or retain adequate documentation of what expenditures were attributable to non-public school services. Therefore, we were not able to determine if the School Corporation met the earmarking requirement for the PN 14217-019-PN01 and PN 45717-019-PN01 grant awards related to regular and preschool grant programs. Grants awarded in 2017-2018 and 2018-2019 had not ended during our audit period, therefore, the earmarking requirements were not tested during this audit. The lack of internal controls and noncompliance was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 19 MARION COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 200.207(a) states in part: "The Federal awarding agency or pass-through entity may impose additional specific 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 and facilities, 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 or facilities within its boundaries, is to the total number of students with disabilities of the same age range." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.327 Financial reporting . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 34 CFR 76.702 states: "A State and a subgrantee shall use fiscal control and fund accounting procedures that insure proper disbursement of and accounting for Federal funds." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management had not developed a system of internal control that segregated key functions. Effect The failure to establish an effective internal control system placed the School Corporation in noncompliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 20 MARION COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish controls to ensure compliance with the compliance requirements listed above. Additionally, we recommended that management of the School Corporation establish controls to ensure supporting documentation will be maintained and available for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2019-004 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants CFDA Numbers: 84.027, 84.173 Federal Award Numbers and Years or Other Identifying Numbers): PN 14216-019-PN01, PN 14217-019-PN01, PN 18611-019-PN01, PN 19611-019-PN01, PN 45716-019-PN01, PN 45717-019-PN01, PN 18619-019-PN01, PN 19619-019-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment 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 Procurement and Suspension and Debarment compliance requirement. Procurement Proper controls were not in place to ensure that applicable procured goods and services were purchased using the small purchase method. The required price or rate quotations for small purchases were not obtained. Suspension and Debarment The School Corporation did not perform any procedures to verify that vendors were not suspended or debarred from participation in federal programs before entering into a contract. The lack of controls and noncompliance was systemic throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 21 MARION COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part. . . . (d) The non-Federal entity's procedures must avoid acquisition of unnecessary or duplicative items. Consideration should be given to consolidating or breaking out procurements to obtain a more economical purchase. Where appropriate, an analysis will be made of lease versus purchase alternatives, and any other appropriate analysis to determine the most economical approach. . . . (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 200.319 states in part: "(a) All procurement transactions must be conducted in a manner providing full and open competition consistent with the standards of this section. . . . (b) The non-Federal entity must conduct procurements in a manner that prohibits the use of statutorily or administratively imposed state, local, or tribal geographical preferences in the evaluation of bids or proposals, except in those cases where applicable Federal statutes expressly mandate or encourage geographic preference. . . . (c) The non-Federal entity must have written procedures for procurement transactions. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. . . ." INDIANA STATE BOARD OF ACCOUNTS 22 MARION COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.320(b) states: "(b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 180.300 states: "When 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 Management had not developed a system of internal controls that segregated key functions. Effect The failure to establish an effective internal control system placed the School Corporation in noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish effective internal controls to ensure compliance 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.