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FINDING 2025-007 Subject: BRIC: Building Resilient Infrastructure and Communities - Internal Controls Federal Agency: Department of Homeland Security Federal Program: BRIC: Building Resilient Infrastructure and Communities Assistance Listings Number: 97.047 Federal Award Numbers and Years (or Other Identifying Numbers): PDMC-PJ-05-IN-2018-003, PDMC-PJ-05-IN-2018-007 Pass-Through Entity: Indiana Department of Homeland Security Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Cash Management, Reporting, Matching, Level of Effort, Earmarking Audit Finding: Material Weakness INDIANA STATE BOARD OF ACCOUNTS 23 SALEM COMMUNITY 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 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. Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Cash Management, Matching, Level of Effort, Earmarking The Building Resilient Infrastructure and Communities (BRIC) program expenditures were to be used for costs associated with building "safe rooms" at the School Corporation's middle school and high school. The School Corporation provided paid claims to a grant administrator, who then prepared and filed reimbursement requests on behalf of the School Corporation. The School Corporation relied on the grant administrator to determine if costs submitted on the paid claims were allowable, in conformance with the cost principles, and adhered to the cash management and matching requirements of the grant. Once the claims were provided to the grant administrator, there was no oversight or review from the School Corporation. Reporting Quarterly performance reports were required to be filed electronically with the Indiana Department of Homeland Security. The grant administrator prepared and submitted the required quarterly reports without any oversight or review from the School Corporation. 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 The School Corporation relied on a grant administrator to ensure compliance; when they became aware that additional review and oversight of the School Corporation was required, the majority of the activity for the grant was already complete. INDIANA STATE BOARD OF ACCOUNTS 24 SALEM COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.