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FINDING 2024-015 Subject: COVID-19 - Education Stabilization Fund - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2022-018. Condition and Context The School Corporation had not properly implemented a system of internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance. Vendor Disbursements Per inquiry with the School Corporation, one employee prepares the reimbursement requests, and another employee reviews the requests to ensure all costs are correct and allowable before giving their approval. A total of 60 claims were sampled for audit. Of the 30 vendor claims tested, there were 3 claims, totaling $2,563, that had no supporting documentation provided to determine if they were an allowable cost nor did they provide support of review and approval of the expenditure. Payroll Disbursements The School Corporation had established internal controls that all payroll is approved by the Treasurer and the School Board. However, during the audit, the School Corporation was unable to provide supporting documentation to show where the governing board approved the rate or pay or stipend amount for 2 of the payrolls selected for testing of $341 in order to determine if the costs were allowable. 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 49 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 the Federal awards that are renewed quarterly or annual, from the date of 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 Due to turnover in staff, supporting documentation could not be located to support for some expenditures paid from the COVID-19 - Education Stabilization Fund during the audit period. Effect The failure to establish an effective system of internal controls could have enabled noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Questioned Costs We identified $2,904 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure supporting documentation is maintained and available for audit to ensure compliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.