FINDING 2025-001 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Number and Year (or Other Identifying Number): S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 15 GREATER JASPER CONSOLIDATED SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-006. Condition and Context A property record or capital asset listing would include the following for each asset: a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. The property record or capital asset listing should be maintained for assets purchased that exceed the School Corporation's capitalization threshold. The School Corporation did not properly design or implement a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation purchased a laser engraver during the audit period from the ESSER II grant totaling $29,655. The asset was purchased using ESSER II funds obtained by the Special Education Cooperative (Cooperative), for which the School Corporation is the fiscal agent. The asset exceeded the School Corporation's capitalization threshold of $5,000; but was omitted from the capital asset listing. Additionally, proper safeguards were not put in place to protect the asset. The lack of internal controls and noncompliance were systemic issues 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). . . ." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. INDIANA STATE BOARD OF ACCOUNTS 16 GREATER JASPER CONSOLIDATED SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. . . ." Cause Although management was aware of the equipment purchase by the Cooperative and the related invoice, they misidentified the ownership of the asset, believing it did not belong to the School Corporation. Furthermore, the School Corporation and the Cooperative had not established formalized procedures to ensure that assets acquired under such agreements were identified, communicated, and recorded in accordance with federal guidelines and the School Corporation's capital asset policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, assets purchased with federal dollars, ESSER funds, were not properly added to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal funds were used to acquire the asset or an identification number. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information and new assets are added, including those of the Cooperative. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.