Finding 372641 (2023-001)

FINDING 2023-001 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425U Federal Award Number and Year (or Other Identifying Number): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 15 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The COVID-19 - Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security Act, and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act, was for the purpose of preventing, preparing for, or responding to the novel coronavirus. A sample of 25 claims charged to the program was selected for testing to verify the expenditures were in conformance with the applicable cost principles. Of the 25 claims tested, 6 claims totaling $1,650, each of which paid an individual for work as a contracted security guard, were identified as not being in conformance with the applicable cost principles. Payment to the security guards was made based on an accounts payable voucher signed by the contractor; however, there was not an invoice, time sheet, or other supporting documentation that accompanied the accounts payable voucher. The ineffective internal controls and noncompliance were systemic issues 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). . . ." 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 200.403 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. . . ." INDIANA STATE BOARD OF ACCOUNTS 16 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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, documentation could not be provided to support amounts charged to the grant. 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. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure time charged to the grant is properly supported, recorded, and approved.