Finding Text
FINDING 2022-003 Subject: Special Education Cluster ? Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education_Preschool Grants Assistance Listing Number: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): FY21, FY22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness Section III ? Federal Award Findings and Questioned Costs (continued) FINDING 2022-003 (continued) Criteria: 2 CFR 200.303 states in part: ?The non-federal Entity must: (b) 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 the 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 200.303 states in part: ?Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:? (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); ? (iv) 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?? Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements. Cause: The School Corporation?s management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements. Effect: The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation is a member of a joint service cooperative (Cooperative). The Cooperative operated the special education programs on behalf of the School Corporation and managed the special education grant funds. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements. During fiscal year 2021, the School Corporation paid membership fees to the Cooperative out of federal Special Education funds. These membership fees made up approximately 48% of the total federal expenditures reimbursed during fiscal year 2021. The Cooperative accounted for state, local, and federal funds in a single fund. The fund did not separately account for each of the funding sources. This made it difficult to identify which expenditures were from federal funds, or to identify expenditures by federal program, award number, or years. Therefore, we could not test compliance for approximately 48% of the expenditures. The lack of internal controls and noncompliance were systemic issues, which occurred specifically during fiscal year 2021. No reportable findings were noted for fiscal year 2022. During fiscal year 2022, the School Corporation started paying membership fees to the Cooperative out of the General Education fund instead of the Special Education funds. All sampled expenditures paid from Special Education funds and requested for reimbursement were determined to be allowable under the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements. Identification as a repeat finding, if applicable: Yes, see Finding 2020-001. Recommendation: As recommended, management implemented internal control procedures for the year ended June 30, 2022. Views of Responsible Officials: Management agrees with this finding and has implemented their corrective action plan.