Finding 366751 (2022-002)

FINDING 2022-002 Subject: Title I Grants to Local Educational Agencies - Internal Controls Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A190014 FY2021, S010A200014 FY2021 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Eligibility; Matching, Level of Effort, Earmarking Audit Finding: Material Weakness Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, material noncompliance related to the grant agreement and the Eligibility and Matching, Level of Effort, Earmarking compliance requirements. Eligibility Data from the School Corporation's student software system is uploaded to the Indiana Department of Education's (IDOE) Data Exchange System. Enrollment and poverty information for the School Corporation is then abstracted by the IDOE from the Data Exchange System. The School Corporation's Research and Evaluation team compared the lunch status eligibility used to determine student poverty in the student software system to the information in Data Exchange System at regular intervals. However, this process was not documented and, therefore, could not be verified. INDIANA STATE BOARD OF ACCOUNTS 22 Level of Effort Form 9 data is submitted to the IDOE semi-annually. The data reported includes the School Corporation's expenditures recorded during that period. The IDOE calculates Maintenance of Effort based on the expenditure information submitted on the Form 9 for that fiscal year. To verify amounts used by the IDOE in their computation were derived from the books and records of the School Corporation, costs were reviewed to ensure they are recorded properly as to account and object code and reported correctly on the Form 9. SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) For payroll amounts, summary level payroll reports were provided to a knowledgeable employee for review; however, the reports lacked sufficient detail to effectively review and verify the proper employees were paid from the correct fund, account, and object codes. Earmarking A portion of the School Corporation's Title I allocation is required to be set aside for parental involvement and homeless reservation. The required amount to be set aside is indicated in the Title I grant application. The School Corporation is responsible for monitoring each required set aside throughout the life of the grant to ensure the obligation is met. Monitoring of each set aside was completed on the reimbursement requests; however, reimbursement requests, although reviewed by a knowledgeable employee, were supported by summary level payroll data. The summary level payroll did not provide sufficient detail to effectively review and verify the proper employees were paid from or should have been paid from earmarked Title I funds. The lack of internal controls was a systemic issue throughout the audit period. 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). . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 23 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place.