Finding Text
FINDING 2023-004
Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The School Corporation paid $1,467,550 from the COVID-19 - Education Stabilization Fund
program for two improvement projects which exceeded the School Corporation's capitalization threshold.
The improvements were not added to the School Corporation's capital asset listing. Additionally, the School
Corporation completed a capital asset inventory as required; however, because material improvements
were not included in the capital asset listing, it was determined that the School Corporation did not reconcile
differences in the property records as required.
The lack of 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 200.313(d) states in part:
"Management requirements. Procedures for managing equipment (including replacement
equipment), whether acquired in whole or in part under a Federal award, until disposition takes
place will, as a minimum, meet the following requirements:
(1) Property records must be maintained that include a description of the property, a serial
number or other identification number, the source of funding for the property (including
the FAIN), who holds title, the acquisition date, cost of the property, percentage of
federal participation in the project costs for the federal award under which the property
was acquired, the location, use and condition of the property, and any ultimate disposition
data including the date of disposal and sales price of the property.
(2) A physical inventory of the property must be taken and the results reconciled with the
property records at least once every two years. . . ."
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 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, improvements purchased were not properly added to the capital asset listing.
In addition, a reconcilement between the inventory records and the property records were not completed.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of federal funds 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 asset records include all assets.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.