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): S425D200013, S425D210013,
S425U210013
Pass-Through Entity: Indianna Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation hired a consultant to compile and provide to them a fixed asset report that
was to contain all inventory and assets purchased that exceeded the School Corporation's capitalization
threshold through June 30, 2023. The consultant prepared the report; however, the School Corporation
did not have any policies or procedures in place to ensure the listing was complete, nor was there any
documentation that differences between the compiled asset report and the School Corporation's equipment
records were reviewed and resolved.
A property record or capital asset listing would include the following for each asset: a description
of the property, a serial number or other identification number, the source of funding for the property
(including the federal award identification number (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, and use and condition of the property, is to be maintained for assets
purchased that exceed the School Corporation's capitalization threshold.
During the audit period, the School Corporation purchased three assets with ESSER funds. Two
of the three assets, totaling $68,459, were not included on the asset listing prepared by the consultant.
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:
INDIANA STATE BOARD OF ACCOUNTS
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NETTLE CREEK SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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)(1) states:
"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 CFR 200.313(d)(2) states: "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.
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, assets purchased with federal dollars, ESSER funds, were not properly added
to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal
funds were used to acquire the asset, nor were any discrepancies in the records reconciled.
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 asset records include all the necessary information,
new assets are properly added, and any discrepancies are reconciled.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
INDIANA STATE BOARD OF ACCOUNTS
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