FINDING 2023-010 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U, 84.425C, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013, S425C200018, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-007. INDIANA STATE BOARD OF ACCOUNTS 37 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation was required to submit an annual data report to the Indiana Department of Education (IDOE) via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted one ESSER I report, one ESSER II report, and one ESSER III report, for a total of three reports. An effective internal control system was not in place at the School Corporation to ensure these reports were accurate. As such, the annual data reports were prepared and submitted to the IDOE without an oversight or review process to prevent or detect and correct errors. All three reports submitted during the audit period were not supported by the School Corporation's records. The following errors were identified: The ESSER I, Year 3 report, which had an applicable reporting period of July 1, 2021 to June 30, 2022, reported $1,526,046 in expenditures. However, actual expenditures for the applicable reporting period totaled $1,601,347. The ESSER II, Year 2 report, which had an applicable reporting period of July 1, 2021 to June 30, 2022, reported $10,293,210 in expenditures. However, actual expenditures for the applicable reporting period totaled $9,750,555. The ESSER III, Year 2 report, which had an applicable reporting period of July 1, 2021 to June 30, 2022, reported $15,939,167 in expenditures. However, actual expenditures for the applicable reporting period totaled $17,220,521. During the audit period, the School Corporation also received eight total reimbursements related to the COVID-19 - Education Stabilization Fund grant. The School Corporation received two GEER reimbursements, two ESSER I reimbursements, two ESSER II reimbursements, two ESSER III reimbursements, and 2 ARP HCY reimbursements. All reimbursement request forms were tested against the School Corporations records for accuracy. Of the eight reimbursements requested, six forms tested were not supported by the School Corporation's records. The following errors were identified: GEER reimbursement requests forms were overstated by $3,580 compared to the School Corporation's records. ESSER I reimbursement request forms were $860,284 overstated compared to the School Corporation's records. ESSER II reimbursement request forms were overstated by $221,808 compared to the School Corporation's records. ESSER III reimbursement request forms were understated by $220,484 compared to the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 38 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for the Federal awards that are renewed quarterly or annual, from the date of submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following. . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." Cause The School Corporation did not establish or implement a properly designed internal control system, including appropriate segregation of duties, to ensure the accuracy and reliability of financial data submitted to the IDOE. The absence of formal review procedures, oversight mechanisms, and reconciliation processes resulted in the submission of materially misstated annual data reports and reimbursement requests. Contributing factors included inadequate staff training on federal reporting requirements, the lack of documented financial reporting policies, and insufficient allocation of resources to monitor compliance with grant guidelines. Effect As a result, the annual data reports submitted to the IDOE via JotForm were materially misstated and lacked proper support from the School Corporation's financial records. Additionally, six out of eight reimbursement request forms tested during the audit period were either overstated or understated, reflecting inconsistent and inaccurate financial reporting tied to federal grant activity. These systemic errors represent significant noncompliance and undermine the reliability of reporting used for state and federal oversight. INDIANA STATE BOARD OF ACCOUNTS 39 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified Recommendation The School Corporation should strengthen its financial reporting processes related to federal grant activity by implementing a formal internal control system that ensures accuracy, consistency, and proper documentation. This includes reconciling financial records with data submitted through JotForm, establishing review procedures for reimbursement requests, and assigning qualified personnel to verify all reports prior to submission. Staff responsible for grant management and financial reporting should receive necessary support and resources regarding federal documentation standards and reporting requirements. The School Corporation should adopt standardized documentation policies and procedures across all departments to ensure compliance and oversight. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.