Finding Text
FINDING 2025-002 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Number and Year (or Other Identifying Number): S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 17 PENN-HARRIS-MADISON SCHOOL CORPORATION 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 2023-004. Condition and Context The Elementary and Secondary School Emergency Relief (ESSER) Fund provided funding to states and school districts to combat the effects of the coronavirus pandemic, help safely reopen and sustain the safe operation of schools, and to address the impact of the coronavirus pandemic on the nation's students. States were required to subgrant a portion of its ESSER allocation to local educational agencies (LEA). Prior to the LEAs receiving their respective subgrants, the LEAs were required to complete an application for ESSER funding, which was submitted to the Indiana Department of Education, the passthrough entity, for approval. The application included a district level budget identifying how the LEA intended to spend program funds. Per the School Corporation's approved application, program funding was budgeted for salaries and respective benefits, counseling services, and supplies. An effective internal control system was not in place at the School Corporation over adjustments into the ESSER II (CRRSA) fund to ensure compliance with requirement related to the grant agreement and the Allowable Costs/Cost Principles compliance requirement. The School Corporation transferred a total of $273,534 of expenditures made up of vendor, payroll, and related benefit payments into grant funds; however, adequate supporting documentation was not provided to determine where the expenditures were originally paid, to whom the original payment was made, and at what amount the original payment was made. The $273,534 was determined to be questioned costs. As a result, the School Corporation was unable to verify the total expenditures requested for reimbursement for the COVID-19 - Education Stabilization Fund grant. The School Corporation requested $273,534, which resulted in an over reimbursement for the COVID-19 - Education Stabilization Fund grant. The lack of internal controls and supporting documentation was isolated to the adjustments noted above. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: INDIANA STATE BOARD OF ACCOUNTS 18 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 34 CFR 76.700 states: "A State and a subgrantee shall comply with § 76.500, the State plan, applicable statutes, regulations, and approved applications, and shall use Federal funds in accordance with those statutes, regulations, plan, and applications." Indiana Department of Education ESSER III Application Walk Through states in part: ". . . Please budget the appropriate items in the district budget. Be sure to include all requested items or activities in the budgeted total and include sufficient detail in the narrative boxes below. Be sure to provide sufficient detail for IDOE to determine the reasonableness, allowability, and necessity of the proposed activity. You may include additional documentation in the Attachments section of the Summary Page. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation for adjustments. Additionally, proper documentation was not maintained to support adjustments. 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. Additionally, without maintaining proper supporting documentation it is not possible to determine if the underlying costs are an allowable cost to the federal program. As a result, costs were reimbursed that did not have adequate documentation to ensure compliance with the compliance requirement. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs We identified $273,534 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure costs and adjustments are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.