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FINDING 2025-003 Subject: COVID-19 - Education Stabilization Fund - Internal Controls 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, S425U200013 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness INDIANA STATE BOARD OF ACCOUNTS 18 CLOVERDALE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system, which would include segregation of duties, was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the following compliance requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles. There was not a documented oversight, review, or approval process in place over payroll-related disbursements paid from the program-related funds. The Treasurer approved a payroll summary report by fund; however, this report does not include payroll distribution information that would ensure the proper employees were being paid from the grant funds in the proper amounts. The lack of internal controls was 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). . . ." Cause Management had not developed a system of internal controls that segregated key functions. Although a detailed payroll distribution report is generated and available for review in the financial software, the Treasurer was unaware that she should document a review of this or a similar report. Effect The lack of an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation strengthen its system of internal controls and document an oversight or review process over payroll distribution reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.