SOUTHWESTERN CONSOLIDATED SCHOOL DISTRICT OF SHELBY COUNTYLocal Government

FINDING 2024-003 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: 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013 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: (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 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 had one project for roof replacement that was funded with ESSER III (84.425U) grant awards and was subject to the Davis-Bacon requirements. The School was not able to provide an executed contract containing the required wage rate requirements clause, nor did the School obtain the required weekly certified payroll reports from the contractor to monitor compliance with Davis-Bacon wage rate requirements. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements. The total project cost disbursed during the audit period was $443,300, which included materials and labor. 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 for projects requiring labor installation and funded by federal grants subject to Davis-Bacon wage rate requirements to ensure compliance with federal regulations. 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 – 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 four sample items tested, we noted the School Corporation expended approximately $86,300 on a 72-passenger bus, $670,600 on roof replacement, $19,000 on an intercom package for the high school, and $21,000 on admin building improvements, which were charged to the ESSER II (84.425D) and ESSER III (84.425U) grant awards. For three of the four sample items (all except the bus purchase), it was noted the capital asset acquisitions could not be traced to the capital asset listing for the School Corporation as of June 30, 2024. We noted the acquisitions were properly approved by IDOE in the grant application, management completed a physical inventory in the 2-year audit period, and the assets were properly maintained and safeguarded. Identification as a repeat finding: No. 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. The capital asset listing should include all required information to track capital asset acquisitions purchased with federal funding. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2024-005 Information on the federal program: Subject: Child Nutrition Cluster - Reporting 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): FY2023 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). . . ." 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 cash management compliance requirement. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the reporting requirements. 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: During the testing of claim reimbursements, we noted for two monthly reimbursements in a sample of six claims that the claim reimbursements were not being reviewed by an independent individual before being submitted to IDOE. In March 2023, the School Corporation implemented a review control over the monthly claim reimbursement. The lack of controls was isolated to the period of July 2022 through February 2023 during fiscal year 2023. For all six claims tested, we agreed the number of meals claimed for reimbursement to underlying meal system reports without exception. Identification as a repeat finding, if applicable: Yes. See Finding 2022-003 in the prior period audit report. Recommendation: We recommended that the School Corporation's management continue to review internal controls surrounding the claim reimbursement process. The secondary, documented review of the request for reimbursement should include a review of the underlying meal count reports to ensure the claim reimbursement request is accurate and complete. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2022-003 Subject: Child Nutrition Cluster ? Internal Controls Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Numbers: 10.553, 10.555 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). . . ." 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 requirement. Cause: The School Corporation's management had not developed a system of internal controls to ensure accurate information was presented in order to be in compliance with the reporting requirements. 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 effective reviews could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by the review process not ensuring there was accurate reporting of the activities of the programs. Questioned Costs: There were $60 of known questioned costs identified. The known questioned costs were calculated taking the number of meals (both breakfast and lunch) overclaimed or underclaimed times the IDOE reimbursement rates for lunch and breakfast for the month tested. The net overclaimed reimbursement amount for the four months tested was $60. Context: For all four monthly claims selected for testing, there was no formal evidence of the sponsor claim reimbursement summary being reviewed by someone independent of who prepared the sponsor claim reimbursement summary prior to submission. Additionally, we noted that for one claim in the sample of four, the meal counts were overclaimed for the month. In October 2020, the School Corporation overclaimed breakfast by 43 meals and underclaimed lunch by 11 meals. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the School Corporation establish a review control to verify the sponsor claim reimbursement summaries are correct. This review should be performed by someone other than the individual submitting the claims and we recommend this review be formally documented. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2022-004 Subject: COVID-19 ? Education Stabilization Fund ? Reporting, Equipment and Real Property Management 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: Reporting, Equipment and Real Property Management 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 and Equipment and Real Property Management 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: 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. Reporting The School Corporation was required to submit two Annual Data Reports to the Indiana Department of Education (IDOE) to meet federal reporting requirements for ESSER grant awards. The first report was for the period of March 13, 2020 to September 30, 2020 and was due by January 21, 2021. The second report was for the period of October 1, 2020 to June 30, 2021 and was due by May 13, 2022. For both reports that were submitted, there was segregation of duties between the preparation of the report and the review and submission of the report by someone other than the preparer. However, the review was not sufficient to prevent the following error: ? In the second report, the amounts reported as expended did not agree to the underlying expenditure records of the School Corporation for ESSER I and ESSER II awards. Per discussion with the Treasurer, the amount in the report included expenditures through the report due date of May 13, 2022 rather than through the reporting period end date of June 30, 2021. This resulted in an overstatement of expenditures of $83,000 for ESSER I and $184,000 for ESSER II. Equipment and Real Property Management During our testing of equipment and real property management, it was noted that the School Corporation had not conducted a physical inventory during the last two years as required. Identification as a repeat finding: No. Recommendation: Reporting: We recommended 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. Equipment and Real Property Management: We recommended that the School Corporation conduct a physical inventory at least once every two years to comply with the federal and state requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.