Finding Text
FINDING 2024-004
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 Number: 84.425D
Federal Award Number and Year (or Other Identifying Number): S425D210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-002.
Condition and Context
The School Corporation had not properly designed a system of internal controls to ensure
compliance with requirements related to the grant agreement and the Equipment and Real Property
Management compliance requirement.
INDIANA STATE BOARD OF ACCOUNTS
21
SCHOOL CITY OF MISHAWAKA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
A property record or capital asset listing is required to be maintained for all equipment purchased
with the Education Stabilization Fund (ESF) grant award to ensure adequate safeguards are in place to
prevent loss or damage of items. Equipment to be included in the listing is that which exceeds the School
Corporation's capital asset threshold of $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 every three years. A physical inventory is completed in house in years which the consultant does
not compile a listing. A physical inventory was conducted by the consultant through June 30, 2023, and
was to be updated for purchases through June 30, 2024, by School Corporation staff. 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.
During the audit period, a total of eight pieces of equipment that met the capitalization threshold
were purchased with the ESF. Of these assets, one was not listed on the capital asset listing prepared by
the consultant for the year ending June 30, 2023, and two were not on the capital asset listing updated inhouse
for the year ending June 30, 2024.
In total, the School Corporation purchased $1,014,045 of equipment and improvements with the
ESFs which should have been recorded as capital assets purchased with federal grant funds as these items
exceeded the capitalization threshold. These items were not detailed in the capital asset listing which also
could have documented if the items were properly maintained and safe-guarded as required. Additionally,
none of the five that were included on the capital asset listing included all required components including
who holds the title and how much was purchased with federal funds.
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 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 dunking for the property (including
the federal award identification number), who holds title, the acquisition date, 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 sales 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.
INDIANA STATE BOARD OF ACCOUNTS 22
SCHOOL CITY OF MISHAWAKA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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. . . ."
Cause
Management did not develop a system of internal controls to ensure that all items over the capital
asset threshold were added to the listing, the capital asset listing included all required information, and
items purchased were properly maintained and safeguarded.
Effect
Noncompliance with the grant agreement and the compliance requirement could result in the
repayment of federal funds.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation establish a proper system of internal controls that
would ensure compliance with the Equipment and Real Property management records.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.