Finding Text
FINDING 2024-005
Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost
Principles and Activities Allowed or Unallowed
Federal Agency: Indiana 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 Requirements: Allowable Costs/Cost Principles, Activities Allowed or Unallowed
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The COVID-19 - Education Stabilization Fund (ESF), established by the Coronavirus Aid, Relief,
and Economic Security (CARES) Act and further funded by the Coronavirus Response and Relief
Supplemental Appropriations Act (CRSSA) and the American Rescue Plan (ARP) Act, was for the purpose
of preventing, preparing for, or responding to the novel coronavirus.
A sample of 40 vendor and payroll disbursements that were charged to the ESF grant for which
reimbursement was received during the audit period was selected for testing to verify the expenditures were
in conformance with the applicable allowable cost principles. Of the 40 disbursements tested, 4 payroll
disbursements for accelerated learning were approved, but the School Corporation could not provide
documentation to show where the governing board approved their rate of pay.
In addition, there was a transfer from the ESSER II - Cares grant fund to the Education fund for
$117,177 to reimburse that fund for expenses on June 20, 2024. The School Corporation was unable to
provide documentation for the expenses that were reimbursed to ensure they were for allowable activities
and allowable costs.
The ineffective internal controls were 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). . . ."
2 CFR 200.334 states in part:
"Financial records, supporting documents, statistical records, and all other non-Federal entity
records pertinent to a Federal award must be retained for a period of three years from the date
of submission of the final expenditure report or, for Federal awards that are renewed quarterly
or annually, from the date of the submission of the quarterly or annual financial report,
respectively, as reported to the Federal awarding agency or pass-through entity in the case of
a subrecipient. . . ."
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:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items. . . .
(g) Be adequately documented. . . ."
Cause
Management had not developed a system of internal controls that would have ensured compliance
with the Allowable Costs/Cost Principles and the Activities Allowed or Unallowed compliance requirements.
Management was not aware that they should have only been reimbursed for expenditures made out of the
ESF funds or should have moved the expenditures and retained proper documentation to support what
expenditures tied to what was reimbursed. It was noted that the accelerated learning rate of pay was
discussed at a School Board meeting, but the approved wage rates were not documented in the School
Board minutes or on any sort of salary schedule approved by the School Board members.
Effect
The failure to design and implement an effective internal control system enabled noncompliance to
go undetected. Noncompliance with the grant agreement and the Allowable Cost/Cost Principles and the
Activities Allowed or Unallowed compliance requirements could result in the loss of future federal funds to
the School Corporation.
Questioned Costs
There was a total of $173,841 of questioned costs as referenced under the Condition and Context.
Recommendation
We recommended that the School Corporation's management establish a system of internal
controls to ensure only allowable activities and allowable costs are charged to grants funds and to ensure
grant money is only requested for reimbursement for monies directly related to the grant program.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.