Finding Text
FINDING 2024-004
Subject: Special Education Cluster (IDEA) - Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: Special Education Grants to States
Assistance Listings Number: 84.027A
Federal Award Numbers and Years (or Other Identifying Numbers): 22611-026-PN01, 23611-026-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation is a member of the Harrison County Exceptional Learners Cooperative
(Cooperative). During fiscal year 2023-2024, the Cooperative operated the special education program and
spent the federal money on behalf of all its members. As the grant agreement was between the Indiana
Department of Education and each member school, the School Corporation was responsible for ensuring
and providing oversight of the Cooperative.
As part of sound management of the federal award, the School Corporation was responsible for
implementing a system of internal controls that would ensure compliance with the applicable requirements.
The School Corporation had not properly designed or implemented such a system to ensure that the
Cooperative complied with the Allowable Costs/Cost Principles compliance requirement. Although one
employee prepared the claims, and the School Corporation Director of Business Operations/Treasurer
approved the claims, the internal controls were not effective to ensure that expenditures were allowed and
in conformance with the cost principles.
During the audit period, the Cooperative used $1,662 of the School Corporation's allocated funding
to purchase snacks for special education students. Such costs are not directly related to providing special
education or related services to children with disabilities, and, accordingly, the Indiana State Board of
Accounts considers this amount to be questioned costs.
The lack of internal controls and noncompliance were isolated to the award numbers identified
above.
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). . . ."
INDIANA STATE BOARD OF ACCOUNTS
23
SOUTH HARRISON COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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. . . ."
34 CFR 300.202 states in part:
"(a) Amounts provided to the LEA under Part B of the Act. . . .
(2) Must be used only to pay the excess costs of providing special education and related
services to children with disabilities, consistent with paragraph (b) of this section; . . ."
Cause
The School Corporation's Director of Business Operations/Treasurer, who was also the fiscal agent
for the Cooperative, stated that special education funds had historically been used in this manner and had
not been questioned previously and that the School Corporation and Cooperative were unaware that this
was not an allowable use of funds.
Effect
Without a proper system of internal controls in place that operated effectively, noncompliance
remained undetected resulting in grant expenditures continuing to be spent for unallowable costs.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the
federal award could result in the loss of future federal funds to the School Corporation.
Questioned Costs
Questioned costs in the amount of $1,662 were identified as noted in the Condition and Context.
Recommendation
We recommended that the School Corporation's management establish a proper system of internal
controls to ensure that expenditures made by the Cooperative from federal awards are allowable per the
terms and conditions of the federal award, as well as 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.