FINDING 2022-007
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Number: 84.425D
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Modified Opinion
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, noncompliance. The School Corporation was required to submit an annual data
report to the Indiana Department of Education (IDOE) via JotForm, a form/report builder. Data to be
submitted included, but was not limited to, current period expenditures, prior period expenditures, and
expenditures per activity. The School Corporation submitted three reports during the audit period; however,
a single employee prepared and submitted the reports without a review or oversight process in place to
prevent or detect and correct errors.
Additionally, two of the three reports tested, ESSER I Year 2 and ESSER II Year 1, were not
supported by the School Corporation's records. The financial information provided was based on estimates
and actual expenditures, and did not agree with the data submitted in the reports, nor to the School
Corporation's records; therefore, the reports were determined to be inaccurate and incomplete.
The key line item "Overall Expenditures" was tested on both reports. The ESSER I Year 2 report
overall expenditures key line item was determined to be understated by $140,160. The ESSER II Year 1
overall expenditures key line item was determined to be overstated by $2,745,818.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
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INDIANA STATE BOARD OF ACCOUNTS
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(b) states in part:
"The financial management system of each non-Federal entity must provide for the following.
. . ."
(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. . . ."
34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format
that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other
responsibilities under the program."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
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.
INDIANA STATE BOARD OF ACCOUNTS
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SOUTH BEND COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the amounts requested for reimbursement could not be reconciled to the
School Corporation's underlying accounting records. 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.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure supporting documentation is used and
retained for all required reports submitted on behalf of the Education Stabilization Fund program funds.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.