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FINDING 2025-006 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 Finding: Material Weakness Condition and Context Local educational agencies that receive funds under the American Rescue Plan - Elementary and Secondary School Emergency Relief Fund (ESSER III) are to reserve not less than 20 percent of the 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. This requirement was set out in enabling legislation for the funds and further implemented in the Education Stabilization Relief Fund Application III, which the School Corporation was required to complete for its award. The Treasurer maintained a spreadsheet of learning loss expenses, but there was no documented internal control in place to ensure earmarking requirements were met. INDIANA STATE BOARD OF ACCOUNTS 22 SALEM COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls was isolated to the ESSER III grant noted above. 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 The spreadsheet maintained by the Treasurer to monitor earmarking was reviewed by a second person, but that review was not documented. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of ensuring compliance with earmarking requirements. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance with the grant agreement and the Matching, Level of Effort, and Earmarking compliance requirement and to ensure the internal controls were properly documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.