FINDING 2023-007
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Number: 84.425
Federal Award Numbers and Years (or Other Identifying Numbers): 5120S425U210013, S425U200013,
S425V200013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls
that would likely be effective in preventing, or detecting and correcting, noncompliance. The School
Corporation was required to submit annual data reports to the Indiana Department of Education 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.
INDIANA STATE BOARD OF ACCOUNTS
33
MICHIGAN CITY AREA SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
During the audit period, the School Corporation submitted two ESSER I reports, two ESSER II
reports, and two ESSER III reports, for a total of six reports. Two of the six reports submitted during the
audit period were not supported by the School Corporation's records. The following errors were identified:
The ESSER II, Year 2 report, which covered the period of July 1, 2021 to June 30, 2022,
reported $4,608,835 in total expenditures. However, the School Corporation's ledger for the
same period had total expenditures of $4,560,160.
The ESSER III, Year 2 report, which had covered the period of July 1, 2021 to June 30, 2022,
reported $118,103 in total expenditures. However, the School Corporation's ledger for the
same period had total expenditures of $317,536.
The lack of internal controls and noncompliance were isolated to these two reports.
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. . . ."
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
A proper system of internal controls was not designed by management of the School Corporation.
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.
INDIANA STATE BOARD OF ACCOUNTS
34
MICHIGAN CITY AREA SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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, ESSER reports were not supported by the School Corporation's records and
were not accurate and complete.
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 to 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 develop policies and procedures to ensure that all reports are submitted accurately.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.