FINDING 2025-014 Subject: Teacher and School Leader Incentive Grants (formerly the Teacher Incentive Fund) - Condition of Records Federal Agency: Department of Education Federal Program: Teacher and School Leader Incentive Grants (formerly the Teacher Incentive Fund) Assistance Listings Number: 84.374 Federal Award Number and Year (or Other Identifying Number): S374A200039 Compliance Requirements: Matching, Level of Effort, Earmarking; Period of Performance; Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation received reimbursements totaling $3,530,669 from Teacher and School Leader Incentive Grants (formerly the Teacher Incentive Fund) (TSL) federal awards during the audit period. Expenditures were to be made in accordance with the approved grant applications and budgets, with reimbursement requests subsequently submitted to the U.S. Department of Education. The School Corporation was responsible for complying with requirements of the grant per the grant agreements. We found the following deficiencies: Matching, Level of Effort, Earmarking The School Corporation did not provide documentation of how the matching requirement was met. Grant award letters were not provided; therefore, we could not ensure the required percentage local match was met. Period of Performance Grant award letters would indicate the period of the grant in which expenditures are allowed to be reimbursed. However, those letters were never provided. Therefore, we could not test to ensure compliance with the Period of Performance compliance requirement. Reporting According to our understanding of the grant, there should have been two final Annual Performance Reports and two mid-year Annual Performance Reports submitted within the audit period. Two reports were provided; however, they were from outside the audit period. Since the appropriate reports were not provided for audit, we could not test to ensure compliance with the Reporting compliance requirement. There were multiple Directors over the Teacher and School Leader Incentive Grants (formerly the Teacher Incentive Fund) during the audit period. At the time the audit was conducted, no previous Directors were employed with the School Corporation and there were no current employees that were knowledgeable of the grant and its requirements. The lack of internal controls and failure to maintain and provide adequate supporting documentation were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 50 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 200.334 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 Federal awards that are renewed quarterly or annually, from the date of the 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 200.302 states in part: "(a) . . . 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. See also § 200.450. (b) The financial management system of each non-Federal entity must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (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. (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. . . . (3) Records that identify adequately the source and application of funds for federallyfunded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. (4) Effective control over, and accountability, for all funds, property, and assets. The non- Federal entity must adequately safeguard all assets and ensure that they are used solely for authorized purposes. See § 200.303. INDIANA STATE BOARD OF ACCOUNTS 51 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award." Cause The School Corporation experienced turnover in key personnel over the federal program, which contributed to the lack of appropriate documentation. A proper system of internal controls was not designed to ensure continuity of policies, procedures, and records when personnel transitions occurred. Effect Noncompliance with the grant agreement and the compliance requirements could result in the repayment of federal funds. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management develop policies and procedures to ensure continuity of school records during a personnel change. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.