Finding 1105739 (2024-003)

FINDING 2024-003 Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 21611-035-PN01, 22611-035-PN01, 21619-035-PN01, 22611-035-ARP, 23611-035-PN01, 24611-035-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance Audit Finding: Material Weakness INDIANA STATE BOARD OF ACCOUNTS 18 SCOTT COUNTY SCHOOL DISTRICT 1 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation was a participating member of the Madison Area Education Special Services Unit Cooperative (Cooperative). The School Corporation was reimbursed by the Cooperative, based on invoices prepared and submitted by the School Corporation for payments to substitute teachers and audit costs related to the special education grants. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Period of Performance compliance requirements. During the audit period, the Deputy Treasurer would prepare Excel spreadsheets of reimbursable expenses and submit them directly to the Cooperative without any secondary review. There was no evidence of administrative oversight of the invoice preparation and submission process by another knowledgeable individual to ensure that the amounts invoiced were for activities allowed, that the costs were allowable, and were for costs incurred during the period of performance. The lack of internal controls was a systemic issue 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). . . ." Cause The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Period of Performance compliance requirements for reimbursable expenses paid by the School Corporation. Those expenses were submitted to the Cooperative for reimbursement from the special education grant funds without any secondary review to ensure that they were legitimate expenses that could be paid from the grant. Effect The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Period of Performance compliance requirements. Noncompliance could have resulted in the loss of federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 19 SCOTT COUNTY SCHOOL DISTRICT 1 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish and implement a system of internal controls related to the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Period of Performance compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.