PENN-HARRIS-MADISON SCHOOL CORPORATION

FINDING 2021-001 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, Summer Food Services Assistance Listing Number: 10.553, 10.555, 10.559 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Suspension and Debarment 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 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 SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." 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 Procurement 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.

FINDING 2021-002 Information on the federal program: Subject: Child Nutrition Cluster ? Cash Management Federal Agency: Department of Education Federal Program: School Breakfast Program, National School Lunch Program, Summer Food Program Assistance Listing Number: 10.553, 10.555, 10.559 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Cash 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). . . ." 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 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: $765. Context: We noted that for three sponsor claim reimbursements in a sample of four claims the amount of meals claimed on each sponsor claim did not agree to the supporting meal system reports. The net overstatement of meals claimed for the four claims sampled was 219 meals resulting in an over reimbursement amount of $765. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the School Corporation ensure the number of meals reported for reimbursement agree to the underlying meal reports before they are submitted for reimbursement. Views of Responsible Officials and Planned Corrective Actions: For the views of the responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2021-003 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: 84.010 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 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 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. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the reporting 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 audit period, there were two final expenditures reports required to be submitted. For the 2019-2020 final expenditure report selected for testing, the parental involvement amount on the final expenditure report was incorrectly reported as zero. The parental involvement amount that was expended for the 2019-2020 grant was $8,409. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the School Corporation establish a documented, secondary review of the final expenditure reports before they are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2021-004 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: 84.010 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Earmarking 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). . . ." 20 USC 6318(a)(3) states in part: "(A) In general - Each local educational agency shall reserve at least 1 percent of its allocation under subpart 2 to assist schools to carry out the activities described in this section, except that this subparagraph shall not apply if 1 percent of such agency's allocation under subpart 2 for the fiscal year for which the determination is made is $5,000 or less. Nothing in this subparagraph shall be construed to limit local educational agencies from reserving more than 1 percent of its allocation under subpart 2 to assist schools to carry out activities described in this section. . . . (D) Use of Funds - Funds reserved under subparagraph (A) by a local educational agency shall be used to carry out activities and strategies consistent with the local educational agency's parent and family engagement policy, including not less than 1 of the following: 28 (i) Supporting schools and nonprofit organizations in providing professional development for local educational agency and school personnel regarding parent and family engagement strategies, which may be provided jointly to teachers, principals, other school leaders, specialized instructional support personnel, paraprofessionals, early childhood educators, and parents and family members. (ii) Supporting programs that reach parents and family members at home, in the community, and at school. (iii) Disseminating information on best practices focused on parent and family engagement, especially best practices for increasing the engagement of economically disadvantaged parents and family members. (iv) Collaborating, or providing subgrants to schools to enable such schools to collaborate, with community-based or other organizations or employers with a record of success in improving and increasing parent and family engagement. (v) Engaging in any other activities and strategies that the local educational agency determines are appropriate and consistent with such agency's parent and family engagement policy." 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 earmarking 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. The School Corporation had no process in place to monitor the progress of the earmarking requirement. 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 audit period, the earmarking requirement for Parental Involvement was not met for the fiscal year 2019-2020 Title I grant, which ended during the audit period. There was $8,409 disbursed for parental involvement for the 2019-2020 grant. However, per the Title I application, the School Corporation was required to disburse $8,998 for parental involvement for 2019-2020 grant. The earmarking requirement was properly met for the 2018-2019 Title I grant which ended during the audit period. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the School Corporation establish a formal process to ensure the School Corporation meets the earmarking requirement. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2021-005 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: 84.010 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility 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 in order to ensure compliance with requirements related to the grant agreement and the eligibility 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: There were twenty-five students selected for sample testing for the audit period. For one of the twenty-five sample students, the student?s poverty status was reported incorrectly on the real time report as paid when the student should have been reported as free. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the School Corporation establish a formal process to ensure the correct poverty status is reported on the real time report for each student. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2021-006 Information on the federal program: Subject: Special Education Cluster (IDEA) - Internal Controls Federal Agency: Department of Education Federal Program: Special Education Cluster (IDEA) Assistance Listing Number: 84.027, 84.173 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Earmarking 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 earmarking 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. The School Corporation had no process in place to monitor the progress of the earmarking requirement. 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 audit period, the earmarking requirement for the Non-Public Proportionate Share was not met for the fiscal year 2017-2018 and 2018-2019 Special Education Cluster grants, whose period of performance ended during the audit period. There was $150,760 disbursed for the Non-Public Proportionate Share for the 2017-2018 grant. However, per the Special Education Cluster application, the School Corporation was required to disburse $150,846 for the Non-Public Proportionate Share for the 2017-2018 grant. There was $187,721 disbursed for the Non-Public Proportionate Share for the 2018-2019 grant. However, per the Title I application, the School Corporation was required to disburse $188,596 for the Non-Public Proportionate Share for the 2018-2019 grant. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the School Corporation establish a formal process to ensure the School Corporation meets the earmarking requirement. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

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 Numbers and Years (or Other Identifying Numbers): FY 2018, FY 2019 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Verification of Free and Reduced Price Applications (NSLP) Audit Finding: Material Weakness Condition and Context An effective internal control system was not in place at the School Corporation in order to ensure compliance related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - Verification of Free and Reduced Price Applications (NSLP) compliance requirements. Activities Allowed or Unallowed and Allowable Costs/Cost Principles There were no controls in place to ensure that payroll benefits paid from the School Lunch fund were for employees working within that program. Payroll benefits were paid without an oversight, review, or approval process, or other compensating control. Special Tests and Provisions - Verification of Free and Reduced Lunch Applications (NSLP) (School Breakfast Program and National School Lunch Program only) There were no controls in place to ensure that verifications of eligibility determinations for free and reduced price meals were accurate for fiscal year 2017-2018. There was no review of the 2017-2018 FSA Verification Summary Report. For 2018-2019, eligibility determinations and the FSA Verification Summary Report were reviewed by a knowledgeable person. INDIANA STATE BOARD OF ACCOUNTS 17 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of controls was a systemic issue throughout the audit period related to Activities Allowed or Unallowed and Allowable Costs/Cost Principles. The lack of controls was an issue over Verification of Free and Reduced Price Applications (NSLP) for 2017-2018 only. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause 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 listed above. A lack of segregation of duties within an internal control system could also have 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 establish controls to ensure compliance with the grant agreement and the compliance requirements listed above. 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 the School Corporation's responsibility to ensure that internal controls were designed to ensure compliance with applicable laws and regulations. The School Corporation failed to provide documented controls of payroll benefits paid to vendors. The vendor payments reviewed were totals that did not contain adequate details to ensure that amounts recorded were accurate. INDIANA STATE BOARD OF ACCOUNTS 18 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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: Child Nutrition Cluster - Cash Management 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 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Cash Management Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit. The prior audit finding number was 2017-006. 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 Cash Management compliance requirement. The School Corporation had not designed or implemented adequate internal controls to ensure that the School Lunch fund's monthly cash balances (net cash resources) were limited to three months average expenditures in compliance with cash management requirements. A review of balances were conducted, but were ineffective in monitoring the cash balances for fiscal year 2017-2018. The School Corporation did not comply with the cash management requirement that they limit cash balances (net cash resources) to three months average expenditures for 2017-2018. The School Corporation implemented a School Lunch Capital Spending Plan to comply with the cash management requirements beginning with 2018-2019. The lack of controls was a systemic issue for 2017-2018. The cash balances (net cash resources) in the School Lunch fund exceeded the three months average expenditures for all 24 months of the audit period; however, the School Corporation properly implemented a School Lunch Capital Spending Plan for 2018-2019. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 19 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.14(b) states: "Net cash resources. The school food authority shall limit its net cash resources to an amount that does not exceed 3 months average expenditures for its nonprofit school food service or such other amount as may be approved by the State agency in accordance with ? 210.19(a)" 7 CFR 220.7(e) states in part: "Each school food authority approved to participate in the program shall . . . with respect to participating schools under its jurisdiction: . . . (iv) Limit its net cash resources to an amount that does not exceed three months average expenditure for its nonprofit school food service or such other amount as may be approved by the State agency; . . ." Cause Management had not developed a system of internal controls that would have ensured compliance with the Cash Management compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Cash Management compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation establish controls to ensure compliance and comply with the grant agreement and the Cash Management compliance requirement. 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.

FINDING 2019-005 Subject: Child Nutrition Cluster - Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children CFDA Numbers: 10.553, 10.555, 10.559 Federal Award Number and Year (or Other Identifying Number): FY 2018 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit. The prior audit finding number was 2017-008. 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 suspension and debarment requirements of the Procurement and Suspension and Debarment compliance requirement. The School Corporation had not established an effective internal control system for fiscal year 2017-2018 to ensure that vendors were not suspended or debarred from participation in federal programs. The School Corporation did not ensure that vendors were not suspended or debarred from participation in federal programs. During 2018-2019, the School Corporation required vendors to sign a form stating they were not suspended or debarred when they submitted their bids for foods and services. The School Board reviewed these bids. The lack of controls and noncompliance were only applicable to 2017-2018. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 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. INDIANA STATE BOARD OF ACCOUNTS 21 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) You do this by: (a) Checking 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 would have ensured compliance with the suspension and debarment requirements. Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the suspension and debarment requirements could have resulted in the loss of federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation establish controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. 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 2019-006 Subject: Title I Grants to Local Educational Agencies - Internal Controls 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): S010A160014, S010A170014, S010A180014 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness INDIANA STATE BOARD OF ACCOUNTS 22 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system was not in place at the School Corporation in order to ensure compliance related to the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements. There were no controls in place to ensure that payroll benefits paid from the Title I Grants to Local Educational Agencies funds were for employees working within those programs. Payroll benefits were paid without an oversight, review, or approval process, or other compensating control. The lack of controls was a systemic issue 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). . . ." Cause 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 listed above. A lack of segregation of duties within an internal control system could also have allowed noncompliance with the compliance requirements listed above and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the program. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation establish controls to ensure compliance with the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. INDIANA STATE BOARD OF ACCOUNTS 23 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Auditor's Response It was the School Corporation's responsibility to ensure that internal controls were designed to ensure compliance with applicable laws and regulations. The School Corporation failed to provide documented controls of payroll benefits paid to vendors. The vendor payments reviewed were totals that did not contain adequate details to ensure that amounts recorded were accurate.

FINDING 2019-007 Subject: Title I Grants to Local Educational Agencies - Special Tests and Provisions - Annual Report Card, High School Graduation Rate 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): S010A160014, S010A170014, S010A180014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Annual Report Card, High School Graduation Rate Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit. The prior audit finding number was 2017-003. Condition and Context An effective internal control system was not in place at the School Corporation in order to ensure compliance related to the grant agreement and the Special Tests and Provisions - Annual Report Card, High School Graduation Rate compliance requirement. For the students removed from the High School cohort graduation rate for mobility reasons there must be written documentation that the student was enrolled in another school or in an educational program that culminated in the award of a high school diploma, or emigrated to another country, or was deceased. One person entered mobility codes into the system without an oversight, review, or approval process, or other compensating control. The lack of controls was a systemic issue 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 24 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause Management had not developed a system of internal controls to ensure compliance with the compliance requirement 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 requirement listed above. A lack of segregation of duties within an internal control system could also have 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 program. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation establish controls to ensure compliance with the grant agreement and the Special Tests and Provisions - Annual Report Card, High School Graduation Rate compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2019-008 Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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): 14217-134-PN01, 18611-134-PN01, 19611-134-PN01, 45717-134-PN01, 18619-134-PN01, 19619-134-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation in order to ensure compliance related to the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements. There were no controls in place to ensure that payroll benefits paid from the Special Education funds were for employees working within those programs. Payroll benefits were paid without an oversight, review, or approval process, or other compensating control. INDIANA STATE BOARD OF ACCOUNTS 25 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) There were no controls in place to ensure that only Special Education employees were paid from those funds. The School Corporation did not present for audit supporting documentation to verify that all employees paid were allowed to be paid from Special Education funds. Documentation used by the School Corporation to prepare payroll did not correlate with the actual amounts paid to employees. The following disbursements charged to Special Education funds did not comply with the Allowable Costs/Cost Principles compliance requirements: 1. Two Educational Assistants were split funded 25-50 percent between the Education fund and the Special Education Grant to States program. Supporting documentation of personnel time documented that the employees worked 100 percent of their time on the Special Education Grants to States. 2. Six Educational Assistants were paid 100 percent from either Special Education Grants to States or Special Education Preschool Grants funds. The School Corporation did not present documentation of personnel time worked for either Special Education program. This resulted in known questioned costs of $63,947 during the audit period. The lack of controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 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. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 26 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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, not exceeding 100% of compensated activities . . . (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. . . ." Indiana Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1- Compliance with compensation for personnel services requirements, page 2 states: "Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely 'Semi-Annual Certification' forms." Cause Management had not developed a system of internal controls that would have ensure compliance with the Activities Allowed or Unallowed and Allowable Costs/Cost Principals compliance requirements. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the compliance requirements could have resulted in the loss of federal funds to the School Corporation. Questioned Costs Known questioned costs of $63,947 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation establish controls to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles 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 the School Corporation's responsibility to ensure that internal controls were designed to ensure compliance with applicable laws and regulations. The School Corporation failed to provide documented controls of payroll benefits paid to vendors. The vendor payments reviewed were totals that did not contain adequate details to ensure that amounts recorded were accurate.

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