FINDING 2023-003
Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Numbers: 84.425C, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425C200018, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The American Rescue Plan - Elementary and Secondary School Emergency Relief (ARP ESSER)
Fund provided funding to states and school districts to help safely reopen and sustain the safe operation of
schools and to address the impact of the coronavirus pandemic on the nation's students. States were
required to subgrant a portion of its ARP ESSER allocation to local educational agencies (LEA). Prior to
LEAs receiving its respective subgrants, LEAs were required to complete an application for ARP ESSER
funding, which was submitted to the Indiana Department of Education (IDOE), the pass-through entity for
approval. The application included a district level budget identifying how the LEA intended to spend
program funds. Per the School Corporation's approved application, program funding was budgeted for
salaries and respective benefits for the Director of Student Support, Title I Aide, Career Coach, Summer
School Positions, and a Social Emotional Academic Learning Liaison, as well as for equipment as classified
under the facilities acquisition and construction expenditure account. The School Corporation noted on its
application that the funds budgeted for equipment were strictly for the costs of the equipment and did not
include any costs for labor.
A sample of 31 claims charged to the ARP ESSER program for which reimbursement was received
during the audit period was selected for testing to verify the expenditures were in conformance with the
applicable cost principles. Of the 31 claims tested, 4 claims totaling $693,454, each of which were paid to
the same contractor, included costs for labor and project management related to air handling units in
multiple buildings. Due to the magnitude of the exceptions identified, all remaining payments made to this
contractor for which the School Corporation received reimbursement during the audit period were
abstracted and reviewed. Upon review of these claims, additional labor, and project management costs of
$306,745 were identified. The aggregate total of $1,000,199 expended for labor and project management
costs are considered questioned costs as they were not approved by the IDOE prior to being expended as
required by the terms and conditions of the federal award.
INDIANA STATE BOARD OF ACCOUNTS
20
CULVER COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
In addition, the School Corporation submitted twice to the IDOE, four different invoices for
expenditures related to the ARP ESSER program. As a result, the School Corporation received duplicate
reimbursements for the expenditures on each of the four invoices, resulting in the School Corporation
receiving $50,000 more than its approved allocation of ARP ESSER funding. The management of the
School Corporation was aware of this error; however, did not contact the IDOE to resolve the issue, nor did
they return the funds to the state. The $50,000 is considered questioned costs.
Lastly, the School Corporation submitted to the IDOE a request for reimbursement for expenditures
totaling $12,113 for the Governor Emergency Education Relief Fund (GEER) program. The School
Corporation received the reimbursement of $12,113 twice from the IDOE. This resulted in the School
Corporation receiving an extra $12,113 of GEER funding that they should not have received. The management
of the School Corporation was aware of this duplicate payment received from the IDOE; however, did
not contact the IDOE to resolve the issue, nor did they return the funds to the state. The $12,113 is
considered questioned costs.
The ineffective internal controls and noncompliance was limited to the items noted above for the
S425C200018 and S425U210013 grant awards.
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 200.403 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. . . ."
34 CFR 76.700 states: "A State and a subgrantee shall comply with § 76.500, the State plan,
applicable statutes, regulations, and approved applications, and shall use Federal funds in accordance with
those statutes, regulations, plan, and applications."
INDIANA STATE BOARD OF ACCOUNTS
21
CULVER COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Indiana Department of Education ESSER III Application Walk Through states in part:
". . . Please budget the appropriate items in the district budget. Be sure to include all requested
items or activities in the budgeted total and include sufficient detail in the narrative boxes below.
Be sure to provide sufficient detail for IDOE to determine the reasonableness, allowability, and
necessity of the proposed activity. You may include additional documentation in the
Attachments section of the Summary Page. . . ."
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.
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, costs not approved in the budget were reimbursed and costs requested twice
were reimbursed. In addition, reimbursements received twice were retained by the School Corporation.
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
Known questioned costs of $1,062,312 were identified as detailed in the Condition and Context.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure costs are included in the approved budget,
are only requested once, and are not retained if received in error.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.