Finding Text
FINDING 2023-003 Subject: Title I Grants to Local Educational Agencies - Internal Controls Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A200014, S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Matching, Level of Effort, Earmarking Audit Finding: Material Weakness Repeat Findings A similar finding related to internal controls was included in the immediately prior audit report. The prior audit finding number was 2022-002. INDIANA STATE BOARD OF ACCOUNTS 22 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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, issues related to the grant agreement and the Activities Allowed or Unallowed and the Matching, Level of Effort, Earmarking compliance requirements. Activities Allowed or Unallowed Title I Payroll Distribution reports were reviewed and approved by the Title I Director or Title I Budget Supervisor to confirm that payroll charges were allowable under the grant. However, the review process was not formally documented and, as a result, could not be verified. Level of Effort The department heads responsible for federal grants, along with the Director of Internal Audits, initiated a review of the Payroll Distribution report to verify that employees were paid from the appropriate funds. However, the review was limited to certain funds and did not encompass all funds within 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 did not establish or implement a proper system of internal controls. Documented procedures were either missing or insufficient to ensure proper review of payroll expenses. Payroll distribution reviews were limited to certain funds and lacked formal documentation, leaving oversight incomplete and inconsistent. Effect The lack of documentation demonstrating appropriate reviews of payroll charges by the School Corporation was present throughout the audit period, which increased the risk that employees could be paid from incorrect funds and compliance with grant requirements could not be demonstrated. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 23 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation The School Corporation should develop and implement a formal internal control system specifically designed to ensure appropriate documentation and review of payroll charges. This system should include documented procedures for payroll approvals, proper segregation of duties, and routine oversight by qualified personnel. The School Corporation should ensure that staff responsible are knowledgeable about compliance standards, including the Activities Allowed or Unallowed and the Matching, Level of Effort, Earmarking compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.