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FINDING 2025-005 Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Numbers and Years (or Other Identifying Numbers): 23611-004-PN01, 24611-004-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The Individuals with Disabilities Education Act (IDEA) authorizes the special education grant programs. The Special Education Cluster (IDEA) includes two grant programs, the Assistance to States for Education of Children with Disabilities program (IDEA, Part B 611) and the Preschool Grants for Children with Disabilities program (Preschool 619). Part B 611 funds are for the excess costs of providing special education and related services for children with disabilities ages 3 through 21. Preschool 619 funds are for the excess costs of providing special education and related services for children with disabilities ages 3 through 5. INDIANA STATE BOARD OF ACCOUNTS 23 COMMUNITY SCHOOLS OF FRANKFORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation applies each year for special education grant funding through the Indiana Department of Education (IDOE). Each year's grant award is separate and distinct from any previous or subsequent special education award. The School Corporation is responsible for monitoring the program activities and maintaining adequate accounting records for each award. During the audit period, separate special education funds were set up in the financial accounting records for each grant award and expenditures were charged to each of those grant funds and later requested reimbursement from the IDOE for those expenditures. During the audit period, there were lump sum adjustments made to the special education funds to move disbursements between special education grant funds after the end of the grant periods. However, the adjustments were not supported by detail indicating which disbursements were moved. During fiscal year 2023-2024, $245,602 was moved from the 23611-004-PN01 program fund to the 24611-004-PN01 program fund. During 2024-2025, $53,475 was moved from the 23611-004-PN01 program fund to the 24611-004-PN01 program fund. 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 200.302 states in part: "(a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. . . . (b) The financial management system of each non-Federal entity must provide for the following . . . (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. INDIANA STATE BOARD OF ACCOUNTS 24 COMMUNITY SCHOOLS OF FRANKFORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Cause Internal controls established by the School Corporation were not operating effectively. The School Corporation also did not properly monitor the recording of transactions to the appropriate grant year to ensure accuracy, which led to numerous adjustments. The School Corporation did not consistently maintain detailed documentation to support which transactions were being requested for reimbursement. Effect Without effective internal controls, the School Corporation cannot ensure that expenditures reimbursed are appropriate. 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. Recommendation We recommended that management of the School Corporation establish a system of internal controls to ensure that grant award funds are properly accounted for and supporting documentation is maintained for the reimbursement requests and adjustments. All expenditure and reimbursement activities should be identifiable to the applicable designated funds. Questioned Costs We identified $299,077 in questioned costs as noted above in the Condition and Context. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.