Finding Text
Information on the federal program: Subject: COVID-19 - Education Stabilization Fund, Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Programs: Elementary and Secondary School Emergency Relief Fund (ESSER III) Assistance Listings Number: 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Audit Finding: Material Weakness, Internal Control 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 awards 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)...." Condition: The School Corporation did not have internal controls in place to ensure compliance with the activities allowed or unallowed and allowable cost/cost principles requirements. The School Corporation had not designed or implemented adequate policies or procedures to ensure that stipend and wage rates were properly reviewed and approved. Cause: Management of the School Corporation did not design an adequate system of internal controls. A properly designed and implemented internal control system should include formal policies and procedures. Policies establish management’s expectations regarding internal controls, while procedures outline the specific actions necessary to implement those policies. Effect: Without the proper design or implementation of the components of a system of internal control, including policies and procedures that provide segregation of duties and additional oversight as needed, the control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: For the testing of activities allowed and unallowed costs-cost principles, 12 vendor disbursements and 40 payroll disbursements were selected for testing. The following deficiencies were noted related to controls over pay rate approvals: • For 10 of 10 stipends sampled, the School Corporation could not provide proper approval of the stipend amount. The total of amount of stipends sampled was $5,056. The total amount of stipends charged to the grant for the audit period was $57,558. • One employee was underpaid by $9, and the error was not caught during the review process. • For two of seven hourly employees sampled, the School Corporation provided a pay chart. However, approval of the rates was not available. • One teacher received twice their regular paycheck amount due to a contract pay off. The School Corporation could not provide approval or additional support related to the contract payoff amount of $1,528. Identification as a repeat finding: No Recommendation: We recommend that the School Corporation strengthen its system of internal control by establishing and implementing policies and procedures to ensure that stipend and wage rates are properly approved and adequate support is maintained to validate those approvals. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.