Finding Text
FINDING 2025-003 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 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 Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-008. 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 Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 19 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Reimbursement requests for the program were prepared by one employee and reviewed by another employee; however, the supporting documentation that was provided to the reviewer did not give a clear distinction as to what expenditures were included in the reimbursement. As the documentation provided was not adequate that accompanied the reimbursement request, and the reimbursement requests, as noted below, did not agree to the ledger, the reviewer could not have ensured expenses were allowed per the federal program and if the cost were in conformance with the allowable cost principles. In addition, while reviews of payroll and vendor claims took place prior to the reimbursement request being compiled, no reviewers had enough detailed information (i.e., fund being charged) or knowledge to determine if the expense was allowable from the federal award funds or was compliant with the cost principles. The lack of internal controls were systemic issues throughout the audit period for ESSER II and ESSER III. 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 A proper system of internal controls was not designed by management of the School Corporation. 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. Reimbursement requests for the program were prepared by one employee and reviewed by another employee; however, detailed supporting documentation was not provided to the reviewer to determine if the expense was allowable from the federal award funds or was compliant with the cost principles. 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 Cost/Cost Principles compliance requirements. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 20 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Cost/Cost Principles compliance requirements and that sufficient detailed supporting documentation accompanies all reimbursement requests. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.