Finding Text
FINDING 2024-005
Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Findings: Material Weakness, Modified Opinion
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, noncompliance related to the purchase of equipment with federal award dollars.
A property record or capital asset listing is required to be maintained for all equipment purchased
with the School Corporation's Education Stabilization Fund grant award. Equipment to be included in the
listing is that which exceeds the School Corporation's capital asset threshold. The School Corporation's
capital asset policy identifies a capital asset as an item which cost at or above $5,000.
The School Corporation hired a consultant to compile and provide to them a fixed asset report that
contained all inventory and assets purchased that exceeded the School Corporation's capitalization
threshold through June 30, 2024. The consultant prepared the report; however, the School Corporation
did not have any policies or procedures in place to ensure the listing was complete, nor was there any
documentation that differences between the compiled asset report and the School Corporation's equipment
records were reviewed and resolved.
INDIANA STATE BOARD OF ACCOUNTS
26
LA PORTE COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The School Corporation's capital asset listing did not include all the required asset information for
assets purchased with federal awards. The following information for each asset was not included in the
School Corporation's capital asset listing: the source of funding for the property (including the federal award
identification number (FAIN)), percentage of federal participation in the project costs for the federal award
under which the property was acquired, and the use and condition of the property.
During the audit period, the School Corporation had improvement projects totaling $8,022,149 with
Education Stabilization Funds (ESF). These assets were not included on the capital asset listing or physical
inventory prepared by the consultant. As such, the School Corporation did not maintain a capital asset
listing with the equipment purchased with the ESF; the School Corporation could not have conducted a
complete physical inventory biannually as required and could not properly maintain and safeguard the
equipment as required.
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). . . ."
2 CFR 200.313(d) states in part:
". . . (1) Property records must be maintained that include a description of the property, a serial
number or other identification number, the source of funding for the property (including the
FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal
participation in the project costs for the Federal award under which the property was acquired,
the location, use and condition of the property, and any ultimate disposition data including the
date of disposal and sale price of the property.
(2) A physical inventory of the property must be taken and the results reconciled with the
property records at least once every two years.
(3) A control system must be developed to ensure adequate safeguards to prevent loss,
damage, or theft of the property. Any loss, damage, or theft must be investigated.
(4) Adequate maintenance procedures must be developed to keep the property in good
condition. . . ."
INDIANA STATE BOARD OF ACCOUNTS
27
LA PORTE COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
The School Corporation stated it did not include the recent improvements to the HVAC on the
capital asset listing as it was waiting to receive an appraisal to determine how much of the project was
equipment related rather than the whole contracted amount. Per the School Corporation's Policy 7455,
entitled Accounting System for Capital Assets, capital assets are to be "capitalized in accordance with
GAAP," which would include the full cost to bring the asset (equipment) to a location and condition for its
use such as installation, assembly, freight, etc.
Effect
Without the proper implementation of an effectively designed system of internal controls, the School
Corporation cannot ensure the capital asset purchases are properly accounted for. Not properly accounting
for equipment that meets the capital asset threshold does not provide an accurate depiction of the total
capital assets maintained by the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommend that management of the School Corporation establish a proper system of internal
controls and develop policies and procedures to ensure asset records include all the necessary information,
new assets are properly added, and any discrepancies are reconciled.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.