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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 Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Earmarking Audit Findings: Material Weakness, Modified Opinion 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 the 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. INDIANA STATE BOARD OF ACCOUNTS 25 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation was responsible for monitoring each required set aside throughout the life of the grant to ensure the obligation was met; however, there was no oversight or review process in place to ensure monitoring of the required set aside. Additionally, the School Corporation could not provide documentation to show that the obligation was met, or not met, to address student learning loss due to the impact of COVID-19 in the School Corporation. The lack of internal controls and noncompliance were systemic 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). . . ." Section 2001(e)(1) of the ARP Act states in part: "A local educational agency that receives funds under this section— (1) shall reserve not less than 20 percent of such 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 . . ." Cause The School Corporation did not have effective internal controls in place to ensure documentation over the required set aside for learning loss was maintained and monitored. 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, documentation was not provided to determine if the required set aside for learning loss was met and monitored. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 26 LAKELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure that the required set aside for learning loss is documented and met in accordance with the grant agreement and the earmarking compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. INDIANA STATE BOARD OF ACCOUNTS 27