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FINDING 2025-011 Subject: COVID-19 - Education Stabilization Fund - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-007. Condition and Context The Grant Director was to review and sign each vendor claim to ensure they were for allowable activities and costs of the grant. However, for 6 of the 40 vendor claims tested, the Grant Director signature was not evidenced indicating a review had occurred. The School Corporation had established a process that included a review of payroll reports; however, these reports did not include fund or account information. Without the fund or account information, the internal control could not detect if payroll disbursements were for allowable activities and costs of the grants. In a test of 20 payroll transactions from the COVID-19 - Education Stabilization Funds, the School Board approved rate of pay or contracts were not provided for 3 individuals totaling $4,410, and 3 stipends totaling $3,300 were to be paid from other grant funds. The costs totaling $7,710 that were not properly documented were considered questioned costs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 37 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not developed an adequate system of internal controls to ensure disbursements were paid from the proper funds and for allowable activities and costs of the program. Effect Noncompliance with the grant agreement and the compliance requirements could result in the repayment of federal funds. INDIANA STATE BOARD OF ACCOUNTS 38 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs We identified $7,710 in known questioned costs as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.