Finding Text
FINDING 2023-010
Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles
Federal Agency: 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: Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
The Elementary and Secondary School Emergency Relief (ESSER) Fund provided funding to
states and school districts to help safely reopen and sustain the safe operation of schools and to address
the impact of the coronavirus pandemic on the nation's students. States were required to subgrant a portion
of their ESSER allocations to Local Educational Agencies (LEA). Prior to the LEAs receiving their
respective subgrants, the LEAs were required to complete an application for the ESSER funding, which
was submitted to the Indiana Department of Education (IDOE), the pass-through entity for approval. The
application included a district level budget identifying how the LEA intended to spend program funds.
A sample of 25 claims charged to the ESSER grant program for which reimbursement was received
during the audit period was selected for testing to verify that the expenditures were in conformance with the
applicable cost principles. Of the 25 claims tested, the following errors were noted:
INDIANA STATE BOARD OF ACCOUNTS
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SHENANDOAH SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
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Two claims, totaling $983, were for payments to a teacher for part-time tutoring.
However, there was not a School Board approved contract or Salary Ordinance that
showed the approval of this position or the rate to be paid.
Two claims, totaling $318,922, were for payments for playground equipment; however,
the related contract supporting the purchase was not provided.
The lack of effective 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 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:
(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. . . ."
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 (for IHE, this per the IHE's
definition of IBS); . . .
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SHENANDOAH SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
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(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. . . ."
Cause
A proper system of internal controls was not designed by the School Corporation's management.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, expenses were paid without adequate supporting documentation.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of future federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management establish a proper system of internal
controls and develop policies and procedures to ensure costs are adequately documented.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.