Finding Text
FINDING 2024-006
Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Number: 84.425U
Federal Award Number and Year (or Other Identifying Number): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
An effective internal control system was not designed or implemented at the School Corporation to
ensure compliance with requirements related to the grant agreement and the Allowable Costs/Cost
Principles compliance requirement.
Federal funds may only be used to pay staff for work that has occurred supporting the objective of
the federal program. As such, proper time and effort documentation is to be maintained by the School
Corporation. The purpose of time and effort recording is to provide documentation of the time spent working
on specific federal programs to ensure charges are accurate for each program.
In a sample of six payroll disbursements charged to the Education Stabilization Fund (ESF) grant,
four disbursements were for payments to employees whose time was split between the ESF and nonfederal
activity. Time and effort records were not maintained for any of these four employees, and, therefore, we
were unable to determine if the total costs were allowable, resulting in $5,572 of questioned costs.
INDIANA STATE BOARD OF ACCOUNTS 26
SCHOOL CITY OF MISHAWAKA
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 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards: . . .
(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 . . .
(iv) Encompass federally-assisted and all other activities compensated by the recipient or
subrecipient on an integrated basis but may include the use of subsidiary records as
defined in the recipient's or subrecipient's written policy; . . .
(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. . . ."
While across the board stipends are not permitted, LEAs may pay staff for COVID-related work that
has been documented. Most, if not all, staff likely had extra responsibilities as well as time and effort to
respond to the pandemic. ESSER funds can be used to pay staff for that work and LEAs are responsible
for documenting that this work occurred. (Indiana Department of Education, ESSER III Frequently Asked
Questions (FAQs) updated August 16, 2021)
INDIANA STATE BOARD OF ACCOUNTS 27
SCHOOL CITY OF MISHAWAKA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
A proper system of internal controls over the payroll disbursements for employees who worked with
both federal and nonfederal programs was not properly designed or implemented by management. The
School Corporation did not maintain a record of the actual time spent working on extra responsibilities for
COVID-related work to ensure allowability.
Effect
Noncompliance with the grant agreement and the compliance requirement resulted in questioned
costs and could result in the repayment of federal funds.
Questioned Costs
Known questioned costs of $5,572 were identified as detailed in the Condition and Context.
Recommendation
We recommended that the School Corporation's management design and implement a system of
internal controls to ensure that disbursement documentation will be obtained, retained, and made available
for audit and that the disbursements comply with the Allowable Costs/Cost Principles compliance requirement.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.