FINDING 2024-012 Subject: Title I Grants to Local Educational Agencies - Level of Effort - Maintenance of Effort, Earmarking Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-011. Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Level of Effort - Maintenance of Effort Maintenance of effort is a district-level test that determines whether the School Corporation is providing a consistent level of financial support to public schools from year-to-year. This rule ensures that the School Corporation does not use Title I funds to shore up reductions in state and local support for public education. The Indiana Department of Education (IDOE) performs the maintenance of effort calculation utilizing Form 9 information provided by the School Corporation. As such, the amounts submitted to the IDOE to be used in the computation are tested to ensure they were recorded properly in the School Corporation's records as to the account and object code. INDIANA STATE BOARD OF ACCOUNTS 41 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) In fiscal years 2022-2023 and 2023-2024, 60 transactions were tested each year to ensure the disbursements were posted to the proper account and object code. For 10 of the 60 transactions selected in 2022-2023, as well as 11 of the 60 transactions selected in 2023-2024, appropriate supporting documentation was not provided for audit. As a result, 21 disbursements could not be verified as to whether they were posted to the proper account or object codes. In addition, 60 disbursement line items were sampled from the IDOE Form 9 for both 2022-2023 and 2023-2024 to ensure the amounts agreed to the ledger. A total of 2 of the 60 disbursement line items in 2022-2023 and 6 of the 60 disbursement line items in 2023-2024 could not be traced to the ledger. Therefore, we were unable to determine if the disbursements for 8 disbursement line items were posted to the proper account or object code. Earmarking The School Corporation did not expend the required minimum amount from grant S010A210014 for parent and family engagement. In addition, the Homelessness Reservation for grants S010A210014 and S010A220014 did not expend the required minimum amounts. 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 200.400 states in part: "(a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. . . ." 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 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." INDIANA STATE BOARD OF ACCOUNTS 42 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 20 USC 6313(c)3 states: "(A) In general A local educational agency shall reserve such funds as are necessary under this part, determined in accordance with subparagraphs (B) and (C), to provide services comparable to those provided to children in schools funded under this part to serve— (i) homeless children and youths, including providing educationally related support services to children in shelters and other locations where children may live; (ii) children in local institutions for neglected children; and (iii) if appropriate, children in local institutions for delinquent children, and neglected or delinquent children in community day programs. (B) Method of determination The share of funds determined under subparagraph (A) shall be determined— (i) based on the total allocation received by the local educational agency; and (ii) prior to any allowable expenditures or transfers by the local educational agency. (C) Homeless children and youths Funds reserved under subparagraph (A)(i) may be— (i) determined based on a needs assessment of homeless children and youths in the local educational agency, taking into consideration the number and needs of homeless children and youths in the local educational agency, and which needs assessment may be the same needs assessment as conducted under section 11433(b)(1) of title 42; and (ii) used to provide homeless children and youths with services not ordinarily provided to other students under this part, including providing— (I) funding for the liaison designated pursuant to section 11432(g)(1)(J)(ii) of title 42; and (II) transportation pursuant to section 11432(g)(1)(J)(iii) of such title." 34 CFR 200.77 states in part: "Before allocating funds in accordance with § 200.78, an LEA must reserve funds as are reasonable and necessary to— (a) Provide services comparable to those provided to children in participating school attendance areas and schools to serve— (1) INDIANA STATE BOARD OF ACCOUNTS 43 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Homeless children and youths, including providing educationally related support services to children in shelters and other locations where homeless children may live. (ii) Funds reserved under paragraph (a)(1)(i) of this section may be— (A) Determined based on a needs assessment of homeless children and youths in the LEA, taking into consideration the number and needs of those children, which may be the same needs assessment as conducted under section 723(b)(1) of the McKinney-Vento Homeless Assistance Act; and (B) Used to provide homeless children and youths with services not ordinarily provided to other students under this subpart, including providing— (1) Funding for the liaison designated under section 722(g)(1)(J)(ii) of the McKinney-Vento Homeless Assistance Act; and (2) Transportation pursuant to section 722(g)(1)(J)(iii) of that Act; (2) Children in local institutions for neglected children; and (2) Children in local institutions for neglected children; and (3) If appropriate (i) Children in local institutions for delinquent children; and (ii) Neglected and delinquent children in community-day school programs; (4) An LEA must determine the amount of funds reserved under paragraphs (a)(1)(i) and (a)(2) and (3) of this section based on the total allocation received by the LEA under subpart 2 of part A of title I of the ESEA prior to any allowable expenditures or transfers by the LEA; . . ." Cause Due to turnover of staffing in the School Corporation's administrative office and recordkeeping issues, the School Corporation's management had not developed a system of internal controls that would have ensured compliance, or that supporting documentation would have been maintained and made available for audit, related to the Matching, Level of Effort, Earmarking compliance requirement. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation cannot ensure compliance with level of effort - maintenance of effort and earmarking requirements. As a result, amounts reported to the oversight agency were not accurately reported. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 44 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish internal controls to ensure Homelessness Reservation and Parental set-aside expenditures are monitored throughout the period of performance to ensure earmarking compliance requirements are met before expiration of the grant. Supporting documentation for these expenditures should be maintained. In addition, proper recordkeeping should be maintained to ensure compliance and comply with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.