FINDING 2023-004
Subject: Twenty-First Century Community Learning Centers - Cash
Management, Program Income and Reporting
Federal Agency: Department of Education
Federal Program: Twenty-First Century Community Learning Centers
Assistance Listings Number: 84.287
Federal Award Numbers and Years (or Other Identifying Numbers): A58-1-21DL-0153,
A58-1-21DL-5176,
A58-2-22DL-0018,
A58-3-23DL-0027
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Cash Management, Program Income, and Reporting
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The School Corporation utilized grant funds to operate an After School Care Safe Harbor Program.
As part of the programs, the students were charged monthly fees to help cover the related costs. Per the
grant guidelines, families cannot be turned away for nonpayment of fees, and any fees collected are to be
reinvested into the programs. Reimbursement requests are to deduct the program income received from
allowable costs prior to claiming reimbursement.
During the audit period, the School Corporation collected fees for the Before School Care Program
and the After School Care Safe Harbor Program in the same manner. Fees collected for both programs
were collected and receipted into the After School fund. For the years ended June 30, 2022, and June 30,
2023, the School Corporation receipted a total of $45,723 and $41,513, respectively, into the After School
fund.
Cash Management
The School Corporation submitted 18 reimbursement requests in the audit period. Costs were
paid prior to requesting reimbursement as required; however, due to the lack of adequate
program income records the reimbursements were not reduced by the program income
received.
INDIANA STATE BOARD OF ACCOUNTS
26
MICHIGAN CITY AREA SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Program Income
Although the School Corporation received approval from the grantor agency to collect program
income, the School Corporation did not properly track students' attendance and payments, both
if paid and how much paid; therefore, we were unable to determine the amount of program
income related to each program. Additionally, the School Corporation did not maintain program
income in a separate fund but comingled it with other nongrant funded program revenues.
Finally, the School Corporation did not deduct program income from allowable costs prior to
claiming reimbursement.
Reporting
Reimbursement Requests
The School Corporation submitted 18 reimbursement requests in the audit period. Of
those, 3 reimbursement requests were selected for testing. Of the 3 reimbursement
requests inspected, none were reduced by program income received, and 1 was not
properly supported by School Corporation records. The reimbursement was overstated by
$14,700 when compared to the ledger. Based on additional procedures performed, the
total requested reimbursements for the audit period were understated by $32,605 when
compared to the ledger.
Year End Reports
End of Year reports are to be submitted within 60 days of the contract end date. A total of
four End of Year Reports were submitted in the audit period and two were selected for
testing. Of the two End of Year reports selected for testing, neither properly included
program income received during the year due to inadequate tracking of program income.
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 200.305(b)(5) states in part: "To the extent available, the non-Federal entity must disburse
funds available from program income (including repayments to a revolving fund), rebates, refunds, contract
settlements, audit recoveries, and interest earned on such funds before requesting additional cash
payments."
INDIANA STATE BOARD OF ACCOUNTS
27
MICHIGAN CITY AREA SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200.307 states in part:
"(a) General. Non-Federal entities are encouraged to earn income to defray program costs
where appropriate. . . .
(e) Use of program income. If the Federal awarding agency does not specify in its regulations
or the terms and conditions of the Federal award, or give prior approval for how program
income is to be used, paragraph (e)(1) of this section must apply. For Federal awards made
to IHEs and nonprofit research institutions, if the Federal awarding agency does not specify in
its regulations or the terms and conditions of the Federal award how program income is to be
used, paragraph (e)(2) of this section must apply. In specifying alternatives to paragraphs
(e)(1) and (2) of this section, the Federal awarding agency may distinguish between income
earned by the recipient and income earned by subrecipients and between the sources, kinds,
or amounts of income. When the Federal awarding agency authorizes the approaches in
paragraphs (e)(2) and (3) of this section, program income in excess of any amounts specified
must also be deducted from expenditures.
(1) Deduction. Ordinarily program income must be deducted from total allowable costs to
determine the net allowable costs. Program income must be used for current costs
unless the Federal awarding agency authorizes otherwise. Program income that the
non- Federal entity did not anticipate at the time of the Federal award must be used to
reduce the Federal award and non- Federal entity contributions rather than to increase
the funds committed to the project.
(2) Addition. With prior approval of the Federal awarding agency (except for IHEs and
nonprofit research institutions, as described in this paragraph (e)) program income may
be added to the Federal award by the Federal agency and the non-Federal entity. The
program income must be used for the purposes and under the conditions of the Federal
award.
(3) Cost sharing or matching. With prior approval of the Federal awarding agency,
program income may be used to meet the cost sharing or matching requirement of the
Federal award. The amount of the Federal award remains the same. . . ."
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."
34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with
program requirements."
INDIANA STATE BOARD OF ACCOUNTS
28
MICHIGAN CITY AREA SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management statements of what should be done to effect internal controls, and
procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, program income was not properly documented resulting in noncompliance
with the Cash Management, Program Income, and Reporting compliance requirements.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding by the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and strengthen its policies and procedures to ensure proper tracking of program income
to ensure all activity and reports submitted on behalf of the Twenty-First Century Community Learning
Centers program funds are accurate.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.