FINDING 2023-003 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 Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A200014, S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Matching, Level of Effort, Earmarking Audit Finding: Material Weakness Repeat Findings A similar finding related to internal controls was included in the immediately prior audit report. The prior audit finding number was 2022-002. INDIANA STATE BOARD OF ACCOUNTS 22 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, issues related to the grant agreement and the Activities Allowed or Unallowed and the Matching, Level of Effort, Earmarking compliance requirements. Activities Allowed or Unallowed Title I Payroll Distribution reports were reviewed and approved by the Title I Director or Title I Budget Supervisor to confirm that payroll charges were allowable under the grant. However, the review process was not formally documented and, as a result, could not be verified. Level of Effort The department heads responsible for federal grants, along with the Director of Internal Audits, initiated a review of the Payroll Distribution report to verify that employees were paid from the appropriate funds. However, the review was limited to certain funds and did not encompass all funds within the School Corporation. The lack of internal 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 The School Corporation did not establish or implement a proper system of internal controls. Documented procedures were either missing or insufficient to ensure proper review of payroll expenses. Payroll distribution reviews were limited to certain funds and lacked formal documentation, leaving oversight incomplete and inconsistent. Effect The lack of documentation demonstrating appropriate reviews of payroll charges by the School Corporation was present throughout the audit period, which increased the risk that employees could be paid from incorrect funds and compliance with grant requirements could not be demonstrated. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 23 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation The School Corporation should develop and implement a formal internal control system specifically designed to ensure appropriate documentation and review of payroll charges. This system should include documented procedures for payroll approvals, proper segregation of duties, and routine oversight by qualified personnel. The School Corporation should ensure that staff responsible are knowledgeable about compliance standards, including the Activities Allowed or Unallowed and the Matching, Level of Effort, Earmarking compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Title I Grants to Local Educational Agencies - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A200014, S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Repeat Findings This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-003. Condition and Context Costs charged to grant funds must be adequately documented. To adequately document payroll expenses charged to the grant fund, contracts or other documentation supporting the employees' approved rates of pay are necessary. The School Corporation utilized a financial software system that has two different sides, an employee portal side and an administrator side. Employee contracts are approved by the employee, the Superintendent of Schools, and the President of the School Board within the system on the employee portal side. Once approved, the data in the employee portal side is fed into a process in the administrator side. The School Corporation could not provide contracts or approved payroll rates for 6 out of 24 employees tested. As such, we could not verify the employees were paid its correct rates for hours spent working on grant related activities. This resulted in known questioned costs of $149,870. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 24 SOUTH BEND COMMUNITY 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). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for the Federal awards that are renewed quarterly or annual, from the date of submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: (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 (for IHE, this per the IHE's definition of IBS); . . . (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 STATE BOARD OF ACCOUNTS 25 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The School Corporation did not maintain or provide adequate documentation to support payroll expenses charged to the grant fund. While employee contracts are approved within the financial software system, the process lacked sufficient oversight and record retention practices to ensure that approved pay rates were accessible and verifiable. Effect Without access to approved contracts or documentation verifying payroll rates for 6 of the 24 employees tested, the School Corporation could not demonstrate that payroll costs charged to the grant were accurate and allowable. This lack of documentation resulted in known questioned costs totaling $149,870. Additionally, the absence of reliable records increases the risk of noncompliance with federal grant requirements and necessitates expanded audit procedures, which will likely lead to higher audit costs. Questioned Costs Questioned costs in the amount of $149,870 were identified as described in the Condition and Context. Recommendation The School Corporation should establish and enforce formal documentation procedures to verify payroll rates for all employees whose compensation is charged to federal grants. This includes maintaining approved contracts, salary schedules, and supporting records that clearly demonstrate the accuracy and allowability of payroll costs. A review and approval process by a second knowledgeable party should be implemented to ensure compliance prior to submission. Additionally, the School Corporation should provide necessary support and resources for staff involved in payroll and grant management to strengthen recordkeeping practices. These measures will reduce the risk of noncompliance, minimize questioned costs, and help control future audit expenses. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Title I Grants to Local Educational Agencies - Earmarking Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A200014, S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Match, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 26 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Earmarking A portion of the School Corporation's Title I allocation is required to be reserved for parental involvement and homeless reservation, as specified in the Title I grant application. The School Corporation is responsible for monitoring these set-asides throughout the grant period to ensure compliance. While monitoring was completed on the reimbursement requests, the requests, though reviewed by a knowledgeable employee, were supported by summary level payroll data. This level of detail was insufficient to confirm that the appropriate employees were charged to the designated Title I funds. Additionally, the School Corporation did not spend the Homeless Student set-aside amount per the Title I application and did not carry over the funds to provide services to students experiencing homelessness in the subsequent school year, along with reserving funds from the next year's grant award. The lack of internal controls and noncompliance was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (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 200.302(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 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." INDIANA STATE BOARD OF ACCOUNTS 27 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 20 USC 6313(c)(3)(A) states: "A local educational agency shall reserve such funds as are necessary under this part, determined in accordance with subparagraphs (B) and (C), to provide services comparable to those provided to children in schools funded under this part to serve - (i) homeless children and youths, including providing educationally related support services to children in shelters and other locations where children may live; (ii) children in local institutions for neglected children; and (iii) if appropriate, children in local institutions for delinquent children, and neglected or delinquent children in community day programs." Cause The School Corporation did not have adequate internal controls to ensure compliance with Title I set-aside requirements. Monitoring procedures relied on summary level payroll documentation, which did not provide sufficient detail to verify that employees charged to Title I were allowable and properly assigned. Additionally, the School Corporation lacked a formal process to track, monitor, and ensure timely use or carryover of the Homeless Student set-aside funds, resulting in noncompliance with the approved Title I application. Effect The lack of detailed payroll documentation and insufficient monitoring of Title I set-asides resulted in the School Corporation being unable to demonstrate that payroll expenditures charged to Title I were accurate, allowable, or aligned with the approved grant budget. The failure to spend or carry over the required Homeless Student set-aside funds limits services available to students' experiencing homelessness. These deficiencies increase the risk of questioned costs, required corrective actions, and potential restrictions on future grant funding, while also creating additional administrative burden during the audit due to the need for expanded testing and follow-up. Questioned Costs There were no questioned costs identified. Recommendation The School Corporation should strengthen internal controls by requiring detailed, employee-level payroll documentation to support all Title I charges and ensure reviewers verify that expenditures align with the approved grant budget. In addition, the School Corporation should implement a formal process to track all Title I set-asides, including parental involvement and homeless reservations, throughout the grant period. Procedures should also be established to ensure the timely use or proper carryover of homeless student set-aside funds in accordance with federal regulations and the approved Title I application. Additionally, the School Corporation should provide necessary support and resources to staff responsible for ensuring grant compliance and helping to prevent similar issues in future grant cycles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006 Subject: Title I Grants to Local Educational Agencies - Reporting Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A200014, S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context The School Corporation was required to submit reimbursement requests and final expenditure reports that included, among other data, both current and prior period expenditures. However, the required reports for federal awards did not capture all activity for the reporting period and were not supported by the School Corporation's records. Reimbursement Requests The School Corporation uses reimbursement requests to claim allowable expenses paid from Title I funds. These requests must be based on and supported by transactions recorded within the School Corporation's Title I accounts. Summary-level reports were generated from the School Corporation's financial system by the Director of Federal Grants for the reimbursement period and attached to the reimbursement request. While reimbursement requests were to be prepared by the Director of Federal Grants and reviewed by the Title I Director or Title I Budget Supervisor, no evidence of this review or oversight process was available. Of the four reimbursement requests selected for testing, three could not be verified against either the summary-level detail attached to the request or a detailed transaction listing. Because the amounts requested for reimbursement could not be traced to underlying records or to reports that accumulated or summarized the data, the accuracy and completeness of the reimbursement requests could not be verified. Final Expenditure Reports Final expenditure reports were expected to be prepared by the Director of Federal Grants using year-to-date expenditure data and reviewed by either the Director of Internal Audit or the Title I Budget Supervisor. However, no evidence was available to show that this review or oversight process took place. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 29 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for the Federal awards that are renewed quarterly or annual, from the date of submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 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." Cause The School Corporation did not design or implement an effective internal control system to ensure the accuracy and compliance of reimbursement and final expenditure reporting processes. Specifically, the School Corporation did not have established procedures requiring the retention of detailed supporting documentation for reimbursement requests, and oversight responsibilities were not consistently carried out or evidenced over the reimbursement requests and final expenditure reports. Additionally, the employee responsible for preparing reimbursement requests during the audit period did not maintain the required documentation, and no secondary review process was in place to detect or correct these deficiencies. INDIANA STATE BOARD OF ACCOUNTS 30 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Because the School Corporation did not retain detailed documentation to support reimbursement requests or provide evidence of the required review of final expenditure reports, the audit team could not verify the accuracy, allowability, or completeness of expenditures charged to the grant. These gaps in documentation increased the audit time and administrative burden, as additional testing and follow-up were necessary to address missing records. As a result, the risk of misreporting, misallocation of federal funds, and potential violations of grant requirements were significantly heightened. Questioned Costs There were no questioned costs identified. Recommendation The School Corporation should establish and implement a formal internal control system to ensure accurate financial reporting and compliance with federal grant requirements. This system should include documented review procedures, clear segregation of duties, and consistent oversight of reimbursement requests and expenditure reports. All financial submissions should be supported by verifiable documentation and reconciled with internal records prior to submission. Additionally, the School Corporation should provide necessary support and resources to staff responsible for ensuring grant compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-007 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 Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A200014, S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Annual Report Card/High School Graduation Rate Audit Findings: Material Weakness, Other Matters Repeat Findings This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-005. INDIANA STATE BOARD OF ACCOUNTS 31 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation reports graduation rate data for all public high schools within the School Corporation using the four-year adjusted cohort rate. The School Corporation has a total of five high schools plus the juvenile detention center for which graduation rate data is submitted. To remove a student from the cohort, the School Corporation must confirm the reason for removal in writing. Additionally, required documentation for each removal type must be retained by the School Corporation. The Indiana Department of Education (IDOE) has outlined the acceptable documentation required when a student exists in a cohort. Once a student's required documentation is received, the School Corporation may then remove the student from the graduation cohort using the associated mobility code. Of the 27 students selected for testing, 10 students had documentation maintained by the School Corporation; however, it was not appropriate per the IDOE's student mobility documentation requirements. There were 9 students that had no documentation to support its mobility code. The lack of internal 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). . . ." 20 USC 7801(23)(B) states: "To remove a student from a cohort, a school or local educational agency shall require documentation, or obtain documentation from the State educational agency, to confirm that the student has transferred out, emigrated to another country, or transferred to a prison or juvenile facility, or is deceased." Cause The School Corporation did not establish or implement an effective internal control system, including adequate segregation of duties, to ensure compliance with the grant agreement and the Special Tests and Provisions - Annual Report Card/High School Graduation Rate compliance requirement. Specifically, the School Corporation failed to maintain appropriate documentation supporting student cohort removals in accordance with the IDOE requirements. This deficiency resulted from a lack of oversight, insufficient staff training on documentation standards, and the absence of formal review procedures to verify the accuracy and completeness of graduation rate data submitted. INDIANA STATE BOARD OF ACCOUNTS 32 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Due to the lack of effective internal controls and noncompliance with the IDOE documentation requirements, the School Corporation submitted inaccurate graduation rate data for the audit period. Specifically, the improper or missing documentation for student cohort removals undermines the reliability of reported graduation rates. This misrepresentation of school performance can affect accountability determinations and jeopardize continued eligibility for federal funding tied to compliance with grant and reporting requirements. Questioned Costs There were no questioned costs identified. Recommendation The School Corporation should design and implement an internal control system to ensure compliance with the IDOE documentation requirements for graduation rate reporting. This includes establishing clear procedures for verifying and retaining acceptable student mobility documentation, assigning oversight responsibilities to ensure proper review of documentation and procedures, and providing staff with necessary support and resources over documentation standards. Periodic reviews and monitoring should be instituted to ensure compliance and improve documentation retention. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-008 Subject: COVID-19 - Education Stabilization Fund - Activities Allowed or Unallowed Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U, 84.425C, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013, S425C200018, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed Audit Finding: Material Weakness Condition and Context The COVID-19 - Education Stabilization Fund (ESF) established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act (CRSSA), and the American Rescue Plan (ARP) Act, was for the purpose of preventing, preparing for, or responding to the novel coronavirus. An effective internal control system was not in place at the School Corporation over payroll costs charged to grant funds. Payroll distribution reports were provided to the director responsible for the ESF grant compliance; however, documentation was not presented for audit as evidence of a review. The lack of internal controls was a systemic issue throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 33 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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 The School Corporation did not establish or implement an effective internal control system over payroll processes to ensure compliance with federal grant requirements. Specifically, payroll charges to the ESF were not subject to a documented secondary review by a knowledgeable individual. Payroll distribution reports were provided to a secondary individual; however, the reports were not reviewed. Effect Because adequate internal controls were not in place, there was an increased risk that unallowable or unsupported payroll costs could be charged to the ESF. The absence of a documented secondary review reduced the School Corporation's ability to ensure that payroll expenditures were accurate, properly supported, and compliant with federal grant requirements. The lack of internal controls may lead to noncompliance, potential repayment obligations, and increased scrutiny from oversight agencies. Questioned Costs There were no questioned costs identified. Recommendation The School Corporation should establish and implement an internal control system over payroll processes to ensure compliance with federal grant requirements. This includes developing formal procedures for documenting payroll charges to federal programs, review and approval processes by a second knowledgeable individual, and maintaining records to support all payroll expenditures. Staff involved in payroll and grant management should receive necessary support and resources regarding federal documentation standards and allowable cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-009 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Costs Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U, 84.425C, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013, S425C200018, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Costs Principles Audit Findings: Material Weakness, Other Matters Condition and Context The COVID-19 - Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act (CRSSA) and the American Rescue Plan (ARP) Act, was for the purpose of preventing, preparing for, or responding to the novel coronavirus. Based on information obtained during the audit, the scope of testing was expanded to include additional transactions in order to assess compliance with federal grant requirements. The expanded testing was necessary to obtain sufficient evidence regarding the allowability and documentation of grant expenditures. The following issues were noted during testing: Vendor Disbursements The School Corporation was unable to provide supporting documentation for three vendors tested: Mamas Against Violence, LTIA, and Kingdom Life. Although Memorandums of Understanding (MOUs) were initiated by the Treasurer, no evidence was provided to demonstrate that the MOUs were reviewed or approved by the School Board at the time of execution. Information provided was based on documentation generated by the School Corporation, including purchase orders, handwritten vendor claim forms, and copies of check payments. However, no itemized vendor invoices were submitted to substantiate the services provided or the payments made, nor to detail the nature of the services rendered. In addition, the School Corporation was unable to provide supporting documentation to verify student participation or substantiate any of the reported metrics associated with the MOU agreements. Payroll Records Out of ten additional payroll transactions tested, three employee pay rates could not be verified. One employee's pay rate did not agree with the salary ordinance, and the School Corporation was unable to provide documentation confirming School Board approval of the rate. The second employee's compensation could not be traced to specific work performed, as neither an hourly rate nor the number of hours worked was documented. The third employee's authorized salary was $30 per hour; however, the issued paycheck reflected $20 per hour. These issues combined resulted in known questioned costs of $38,400. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 35 SOUTH BEND COMMUNITY 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). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for the Federal awards that are renewed quarterly or annual, from the date of submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: (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 (for IHE, this per the IHE's definition of IBS); . . . (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 STATE BOARD OF ACCOUNTS 36 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The School Corporation demonstrated weaknesses in documentation and compliance practices. Vendor contracts and payments lacked adequate supporting records, including evidence of the School Board approval for MOUs and itemized invoices. The School Board approved pay rates, hours worked, and reconciliation of authorized salaries to amounts paid, limiting the ability to verify the accuracy and appropriateness of expenditures. Effect Without proper documentation, the allowability of grant expenditures cannot be substantiated, creating a risk that unallowable costs may be charged to the federal grant. In addition, incomplete payroll records prevent verification of compensation, heightening the risk of inaccurate payments, unsupported variances, and potential misuse of federal funds. Questioned Costs Questioned costs in the amount of $38,400 were identified as described in the Condition and Context. Recommendation To address these deficiencies, the School Corporation should strengthen documentation practices by ensuring all vendor contracts, MOUs, and invoices are properly reviewed, approved by the School Board, and retained. Payroll internal controls should be improved by reconciling authorized salary ordinances to actual pay rates, documenting hours worked, and retaining evidence of the School Board approval for all compensation. In addition, periodic monitoring and internal reviews should be implemented to verify adherence to federal grant requirements and School Corporation policies, thereby reducing the risk of noncompliance and enhancing accountability. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-010 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U, 84.425C, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013, S425C200018, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-007. INDIANA STATE BOARD OF ACCOUNTS 37 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation was required to submit an annual data report to the Indiana Department of Education (IDOE) via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted one ESSER I report, one ESSER II report, and one ESSER III report, for a total of three reports. An effective internal control system was not in place at the School Corporation to ensure these reports were accurate. As such, the annual data reports were prepared and submitted to the IDOE without an oversight or review process to prevent or detect and correct errors. All three reports submitted during the audit period were not supported by the School Corporation's records. The following errors were identified: The ESSER I, Year 3 report, which had an applicable reporting period of July 1, 2021 to June 30, 2022, reported $1,526,046 in expenditures. However, actual expenditures for the applicable reporting period totaled $1,601,347. The ESSER II, Year 2 report, which had an applicable reporting period of July 1, 2021 to June 30, 2022, reported $10,293,210 in expenditures. However, actual expenditures for the applicable reporting period totaled $9,750,555. The ESSER III, Year 2 report, which had an applicable reporting period of July 1, 2021 to June 30, 2022, reported $15,939,167 in expenditures. However, actual expenditures for the applicable reporting period totaled $17,220,521. During the audit period, the School Corporation also received eight total reimbursements related to the COVID-19 - Education Stabilization Fund grant. The School Corporation received two GEER reimbursements, two ESSER I reimbursements, two ESSER II reimbursements, two ESSER III reimbursements, and 2 ARP HCY reimbursements. All reimbursement request forms were tested against the School Corporations records for accuracy. Of the eight reimbursements requested, six forms tested were not supported by the School Corporation's records. The following errors were identified: GEER reimbursement requests forms were overstated by $3,580 compared to the School Corporation's records. ESSER I reimbursement request forms were $860,284 overstated compared to the School Corporation's records. ESSER II reimbursement request forms were overstated by $221,808 compared to the School Corporation's records. ESSER III reimbursement request forms were understated by $220,484 compared to the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 38 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for the Federal awards that are renewed quarterly or annual, from the date of submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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 and 200.329. . . ." 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." Cause The School Corporation did not establish or implement a properly designed internal control system, including appropriate segregation of duties, to ensure the accuracy and reliability of financial data submitted to the IDOE. The absence of formal review procedures, oversight mechanisms, and reconciliation processes resulted in the submission of materially misstated annual data reports and reimbursement requests. Contributing factors included inadequate staff training on federal reporting requirements, the lack of documented financial reporting policies, and insufficient allocation of resources to monitor compliance with grant guidelines. Effect As a result, the annual data reports submitted to the IDOE via JotForm were materially misstated and lacked proper support from the School Corporation's financial records. Additionally, six out of eight reimbursement request forms tested during the audit period were either overstated or understated, reflecting inconsistent and inaccurate financial reporting tied to federal grant activity. These systemic errors represent significant noncompliance and undermine the reliability of reporting used for state and federal oversight. INDIANA STATE BOARD OF ACCOUNTS 39 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified Recommendation The School Corporation should strengthen its financial reporting processes related to federal grant activity by implementing a formal internal control system that ensures accuracy, consistency, and proper documentation. This includes reconciling financial records with data submitted through JotForm, establishing review procedures for reimbursement requests, and assigning qualified personnel to verify all reports prior to submission. Staff responsible for grant management and financial reporting should receive necessary support and resources regarding federal documentation standards and reporting requirements. The School Corporation should adopt standardized documentation policies and procedures across all departments to ensure compliance and oversight. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.