Muncie Community Schools

FINDING 2025-001 Information on the federal program: Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Significant Deficiency, Other Matters 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). . . ." 2 CFR 200.430 states in part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 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 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: $5,476 (Known questioned costs) Context: During testing of allowable activities and costs, it was observed that the School Corporation allocated payroll and benefit expenses to the school lunch fund for the employee overseeing the food service management company. Five payroll transactions totaling $5,476 were selected for testing. For each transaction tested, the School Corporation allocated 18% of the employee’s time to the school lunch fund. Although the employee completed an annual self-certification estimating time spent on food service duties, there was no detailed time and effort log to support actual hours worked. Additionally, no internal control existed to provide a documented secondary review of the self-certification for accuracy and completeness. Identification as a repeat finding: This is a repeat finding from the immediately prior audit. The prior finding number was 2024-003. Recommendation: We recommend management ensure that time and effort logs are maintained for all employees not charged at 100% to support work performed and charged to the grant awards. We recommend management establish a documented review by management of time and effort logs to ensure time charged to grant awards is allowable and allocable based on work performed in accordance with grant requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2024-003 Information on the federal program: Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024 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). . . ." 2 CFR 200.430 states in part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 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 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: $5,338 (Known questioned costs) Context: For 5 selections, in a sample of 5 payroll transactions, the School Corporation did not have time and effort logs to support the portion of the employee’s time charged to the grant. The employees’ time was split with a non-federal fund; however, the School Corporation did not have support for the allocation of the time charged to the School Lunch fund. Identification as a repeat finding: No. Recommendation: We recommend management ensure semi-annual certifications are completed for all employees charged to the grant awards at 100% and time and effort logs are maintained for all employees not charged at 100% to support work performed and charged to the grant awards. We recommend management establish a documented review by management of semi-annual certifications and time and effort logs to ensure time charged to grant awards is allowable and allocable based on work performed in accordance with grant requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2024-004 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): S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting 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). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 Financial reporting . . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 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 reporting 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. Management misinterpreted the instructions for the reporting requirements and believed that they did not need to fill in the expense information as an LEA. 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: The School Corporation was required to submit one Annual Data Reports to the Indiana Department of Education (IDOE) during the audit period to meet federal reporting requirements for ESSER grant awards. We noted that the ESSER II amount reported for the reports covering the FY23 time period ($4,934,473) did not agree to the underlying expenditure records ($4,801,053) for the period of July 1, 2022 through June 30, 2023. Identification as a repeat finding: This is a repeat finding from the immediately prior audit. The prior finding number was 2023-006. Recommendation: We recommend someone other than the preparer of the report perform a documented review prior to submission to validate the accuracy and completeness of the data submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2023-004 Information on the federal program: Subject: Title I Grants to Local Educational Agencies - Internal Controls Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listing Number: 84.010A 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: $1,400 Context: In a sample of forty payroll disbursements, one disbursement was for an unallowable purpose. The item was for an ESSER stipend payment of $1,400 that was incorrectly charged to the Title I grant instead of the ESSER grant. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the School Corporation establish a documented, primary review of all Title I claims before they are paid to ensure they relate to Title I activities. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2023-005 Information on the federal program: Subject: Title I Grants to Local Educational Agencies - Internal Controls Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listing Number: 84.010A Pass-Through Entity: Indiana Department of Education Compliance Requirement: Maintenance of Effort 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 maintenance of effort 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: In a sample of twenty five disbursements selected for proper classification, one disbursement for $13,000 was coded to the incorrect account code. The State uses the expenditures and account codes reported by the School Corporation on the semi-annual form 9 report to determine if the School Corporation has met its maintenance of effort requirement. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the School Corporation establish a documented, primary review of all Title I claims to ensure they are recorded to the correct account code. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2023-006 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: 84.425C, 84.425D, 84.425U Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Finding: Material Weakness 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). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 Financial reporting . . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 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 reporting 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. Management misinterpreted the instructions for the reporting requirements and believed that they did not need to fill in the expense information as an LEA. 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: The School Corporation was required to submit one Annual Data Report to the Indiana Department of Education (IDOE) to meet federal reporting requirements for ESSER grant awards. The report was for the period of July 1, 2021 through June 30, 2022 and was due by April 7, 2023. We noted the amounts reported as expended ($0) on the report did not agree to the amounts expended per the underlying expenditure records, $8,175,199 for the report time period. Identification as a repeat finding: No. Recommendation: We recommend someone other than the preparer of the report perform a documented review prior to submission to validate the accuracy and completeness of the data submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2023-007 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 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness 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… (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 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 one of the two construction items sampled, the School Corporation did not have an internal control designed to collect the weekly payroll reports certifications from a construction company and its subcontractors for a building project. Additionally, the contract with the vendor did not include the required wage-rate requirements in the contract. The item cost $15,405 to remove asbestos in the building. For the other sample item, the School Corporation did receive the weekly payroll reports and include the wage-rate requirements in the contract. The total paid to the vendor in the audit period was $14,140,694 for construction on two of the School Corporation’s buildings. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior finding number was 2022-001. Recommendation: We recommend the School Corporation implement a formal process to ensure the required weekly payroll reports certifications are collected and reviewed for all construction related federal expenditures to ensure compliance with the wage rate requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2022-001 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, 84.425U Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Material Noncompliance 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? (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. The School Corporation did not obtain the weekly payroll reports certifications from a construction company and its subcontractors for a building project. 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 have an internal control designed to collect the weekly payroll reports certifications from a construction company and its subcontractors for a building project. The construction payments represented 49% of the Education Stabilization Fund expenditures for the audit period. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements. The construction contracts did include clauses for federal wage rate requirements. 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. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2020-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts 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 CFDA Numbers: 10.553, 10.555, 10.559 Federal Award Number and Year (or Other Identifying Number): 2019-2020 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2019-003. 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 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. The School Corporation had not designed or implemented adequate policies and procedures to ensure that program costs were supported by proper documentation to ensure that the costs were allowable and for only the operation of the food service program. In addition, there were no internal controls to ensure that food service program sales were properly recorded in the School Lunch fund. Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts The School Corporation entered into a cost-reimbursement contract, dated March 21, 2016, with a food service management company. Three invoices for payment to the food service management company, which totaled $888,674, were selected for testing. Detailed supporting documentation could not be presented for audit. Additionally, the documentation presented could not be matched to the costs invoiced. Due to the lack of adequately detailed documentation that matched the costs invoiced, we were unable to determine if the costs paid were for activities allowed or even allowable expenditures, and, therefore, proper uses of program income for the federal programs. The costs that were not properly documented were considered questioned costs. Special Tests and Provisions - School Food Accounts The disbursement claims were prepared and submitted by the management company's resident district manager; however, there were no procedures in place to ensure that the reimbursement receipt was promptly and properly receipted into the School Lunch fund. Context The lack of internal controls, noncompliance, and failure to maintain adequate supporting documentation of program costs 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). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification; (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 210.14 states in part: "(a) Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . . (c) Financial assurances. The school food authority shall meet the requirements of the State agency for compliance with ? 210.19(a) including any separation of records of nonprofit school food service from records of any other food service which may be operated by the school food authority as provided in paragraph (a) of this section. . . . (f) . . . (3) All revenue from the sale of nonprogram foods shall accrue to the nonprofit school food service account of a participating school food authority. . . ." 7 CFR 220.7(e) states in part: "Each school food authority approved to participate in the program shall enter into a written agreement with the State agency or the Department through the FNSRO, as applicable, that may be amended as necessary. . . . Such agreements shall provide that the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (1) . . . (ii) In accordance with the financial management system established under ? 220.13(i) of this part, use all revenues received by such food service only for the operation or improvement of that food service . . . (12) Maintain a financial management system as prescribed by the State agency, or FNSRO where applicable; . . ." Cause The School Corporation's management had not developed a system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit related to the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Effect The failure to retain and provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. Questioned Costs Known questioned costs of $888,674 were identified in the Condition and Context. Recommendation We recommended that the School Corporation's management establish internal controls to ensure that documentation will be maintained and made available for audit related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. Auditor's Response It was and is the School Corporation's responsibility to be in compliance with all applicable federal regulations and guidelines when accepting a federal grant. This included having internal controls over all applicable compliance requirements. It is our responsibility to express an opinion on the School Corporation's compliance with each major federal program as well as consider the School Corporation's internal controls over compliance with those types of requirements that could have a direct and material effect on each major federal program. We acknowledge that during the past year alternative methods had to be utilized to deal with mandatory stay at home orders, school closures, and the impact of COVID 19; however, the months October 2019, November 2019, and January 2020, selected for testing, where prior to the national pandemic and the need for alternative measures.

FINDING 2019-003 Subject: Child Nutrition Cluster - Internal Controls 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 Number and Year (or Other Identifying Number): FY 2018-2019 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Cash Management, Eligibility, Special Tests and Provisions - Verification of Free and reduced Price Applications (NSLP), Special Tests and Provisions - School Food Accounts, Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Program Income Audit Finding: Material Weakness Repeat Finding This is a repeat of Finding 2018-003, 2018-004, and 2018-006 from the immediately prior audit report. Condition and Context The following deficiencies in internal controls were identified: Cash Management - There were no procedures in place to monitor that net cash resources did not exceed a three month average of School Lunch fund expenditures. The School Corporation's cash resources for the Child Nutrition Cluster programs exceeded the three month average of expenditures, so a spend-down plan was created and implemented. However, there were no procedures in place to perform calculations verifying that the School Corporation did not exceed the average; therefore, there were no procedures to review such calculations. Eligibility - No procedures were in place to review or monitor the accuracy of the Child Nutrition Cluster eligibility determinations. Free and reduced price applications were processed by the management company's administrative assistant with no additional review or oversight over the determinations made. Special Tests and Provisions - Verification of Free and Reduced Price Applications (NSLP) - Verifications of free and reduced price applications were performed by the management company's resident district manager; however, there was no documented review of the verified applications during the audit. Special Tests and Provisions - School Food Accounts - The disbursement claims were prepared and submitted by the management company's resident district manager; however, there were no procedures in place to ensure that the reimbursement receipt was promptly and properly receipted into the School Lunch fund. MUNCIE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Activities Allowed or Unallowed and Allowable Costs/Cost Principles - There were no procedures in place to monitor that expenditures were only for allowable activities and costs of the Child Nutrition Cluster. The School Corporation contracted with a company for the management of the School Corporation's food service operations. The company provided summarized invoices to the School Corporation without providing adequate detail of the amounts billed. Program Income - The School Corporation contracted with a management company for food service operations. The School Corporation did not provide any additional review of the school lunch income or the detailed expenditures charged by the management company. Context The lack of controls was a systemic issue, which occurred 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 Management had not developed a system of internal controls that would have ensured 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 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. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. MUNCIE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Auditor's Response We acknowledge that, due to the timing of the prior audit, the School Corporation did not have time to correct the identified issues before the beginning of the current audit period; however, we are required to report the control deficiencies and noncompliance which were present in the current audit period. The responsibility for compliance with all applicable regulations and guidelines was assumed by the School Corporation when it accepted the federal grants. The timing of our audit does not release the School Corporation of that responsibility.

FINDING 2019-004 Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance 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): 45717-008-PN01, 14217-008-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance Audit Findings: Material Weakness, Other Matters 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 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance compliance requirements. Disbursements were charged to the grant funds without adequate documentation to ensure compliance with the compliance requirements listed above. Expenditures originally paid from one special education grant were transferred to another special education grant without adequate documentation. These following expenditures were considered questioned costs: There were two transfers that affected Federal Award Number 45717-008-PN01 (fund 5270) and Federal Award Number 14217-008-PN01 (fund 5271). 1. $13,491 was transferred from fund 5270 to fund 101 without proper supporting docu-mentation. 2. $38,265 was transferred from fund 5271 to fund 100 without proper supporting docu-mentation. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: MUNCIE 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). . . ." 34 CFR 300.202(a) states: "General. Amounts provided to the LEA under Part B of the Act? (1) Must be expended in accordance with the applicable provisions of this part; (2) Must be used only to pay the excess costs of providing special education and related services to children with disabilities, consistent with paragraph (b) of this section; and (3) Must be used to supplement State, local, and other Federal funds and not to supplant those funds." 34 CFR 300.208 states: "(a) Uses. Notwithstanding ?? 300.202, 300.203(b), and 300.162(b), funds provided to an LEA under Part B of the Act may be used for the following activities: (1) Services and aids that also benefit nondisabled children. For the costs of special education and related services, and supplementary aids and services, provided in a regular class or other education-related setting to a child with a disability in accordance with the IEP of the child, even if one or more nondisabled children benefit from these services. (2) Early intervening services. To develop and implement coordinated, early intervening educational services in accordance with ? 300.226. (3) High cost special education and related services. To establish and implement cost or risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in a consortium of which the LEA is a part, to pay for high cost special education and related services. (b) Administrative case management. An LEA may use funds received under Part B of the Act to purchase appropriate technology for recordkeeping, data collection, and related case management activities of teachers and related services personnel providing services described in the IEP of children with disabilities, that is needed for the implementation of those case management activities." 34 CFR 300.800 states: "The Secretary provides grants under section 619 of the Act to assist States to provide special education and related services in accordance with Part B of the Act? (a) To children with disabilities aged three through five years; and MUNCIE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (b) At a State's discretion, to two year-old children with disabilities who will turn three during the school year." 2 CFR 200.403 states: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. See also ? 200.306 Cost sharing or matching paragraph (b). (g) Be adequately documented. See also ?? 200.300 Statutory and national policy requirements through 200.309 Period of performance of this part." 2 CFR 200.309 states: "A non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance (except as described in ? 200.461 Publication and printing costs) and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity." 34 CFR 76.730 states: "A State and a subgrantee shall keep records that fully show: (a) The amount of funds under the grant or subgrant; (b) How the State or subgrantee uses the funds; (c) The total cost of the project; (d) The share of that cost provided from other sources; and (e) Other records to facilitate an effective audit." MUNCIE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause The School Corporation had not developed or implemented a system of internal controls that would have ensured compliance with the grant agreement and the compliance requirements listed above. Effect The failure to establish an effective internal control system enabled noncompliance to remain undetected. Noncompliance with the grant agreement and the compliance requirements listed above could have resulted in the loss of federal funds to the School Corporation. Questioned Costs Known questioned costs of $51,756 were identified, as detailed in the Condition and Context. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2019-005 Subject: Title I Grants to Local Educational Agencies - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Reporting Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies CFDA Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A170014, S010A180014 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Reporting Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2018-008. 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 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting compliance requirements. Several expenditures were requested for reimbursement multiple times throughout fiscal year 2018-2019. In one instance, subsequently voided purchase orders were used as the basis for the disbursements on a reimbursement request and were then requested again when the actual purchase was made. Other instances were due to errors in compiling financial information for the preparation of the reimbursement request. MUNCIE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of controls and noncompliance were systemic issues, which occurred throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. See also ?? 200.300 Statutory and national policy requirements through 200.309 Period of performance of this part." 2 CFR 200.305(b) states in part: "For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. . . . (3) Reimbursement is the preferred method when the requirements in paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per ? 200.207 Specific conditions, or when the non-Federal entity requests payment by reimbursement. This method may be used on any Federal award for construction, or if the major portion of the construction project is accomplished through private market financing or Federal loans, and the Federal award constitutes a minor portion of the project. . . ." 31 CFR 205.12(b)(5) states: "Reimbursable funding means that a Federal Program Agency transfers Federal funds to a State after that State has already paid out the funds for Federal assistance program purposes." MUNCIE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 and 200.328 Monitoring and reporting program performance. . . ." Cause Management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting compliance requirements. Effect The failure to establish an effective internal control system enabled noncompliance with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting compliance requirements. Questioned Costs Known questioned costs of $157,181.81 were identified, as detailed in the Condition and Context. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. Auditor's Response We acknowledge that, due to the timing of the prior audit, the School Corporation did not have time to correct the identified issues before the beginning of the current audit period; however, we are required to report the control deficiencies and noncompliance which were present in the current audit period. The responsibility for compliance with all applicable regulations and guidelines was assumed by the School Corporation when it accepted the federal grants. The timing of our audit does not release the School Corporation of that responsibility.

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