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FINDING 2025-004 Subject: COVID-19 - Education Stabilization Fund - Earmarking Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425U Federal Award Number and Year (or Other Identifying Number): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the Matching, Level of Effort, Earmarking compliance requirement. A portion of the ESSER III allocation is required to be set aside for learning loss. The required amount to be set aside is indicated in the ESSER III grant application. The School Corporation is responsible for monitoring each required set aside throughout the life of the grant to ensure the obligation is met. There was no oversight or review process in place to ensure monitoring of the required set aside. The School Corporation did not provide documentation to show that the set aside for the learning loss obligation was met or not met due to COVID-19 pandemic. 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). . . ." Section 2001(e)(1) of the ARP Act states in part: "(e) Uses of Funds--A local educational agency that receives funds under this section— INDIANA STATE BOARD OF ACCOUNTS 19 CROTHERSVILLE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (1) shall reserve not less than 20 percent of such funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day, comprehensive afterschool programs, or extended school year programs, and ensure that such interventions respond to students' academic, social, and emotional needs and address the disproportionate impact of the coronavirus on the student subgroups . . ." Cause Management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Effect The failure to establish an effective internal control system and maintain adequate supporting documentation enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement could result in the loss of federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish an effective system of internal controls and maintain adequate supporting documentation to ensure compliance and 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.