FINDING 2023-003
Information on the federal program:
Subject: Special Education Cluster (IDEA) - Earmarking
Federal Agency: Department of Education
Federal Program: Special Education Grants to States
Assistance Listings Number: 84.027
Federal Award Numbers and Years (or Other Identifying Numbers): 19611-022-PN01, 20611-022-PN01,
21611-022-PN01, 22611-022-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Matching, Level of Effort, Earmarking
Audit Findings: Significant Deficiency
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 awards 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:…
(g) Be adequately documented. . . ."
2 CFR 200.208(b) states in part:
"The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as
needed . . ."
511 IAC 7-34-7(b) states:
"The public agency, in providing special education and related services to students in nonpublic schools
must expend at least an amount that is the same proportion of the public agency total subgrant under 20
U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their
parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the
same age range." FINDING 2023-003 (Continued)
Condition: The School Corporation did not have internal controls in place to ensure that the Cooperative
complied with the earmarking requirements. The Cooperative did not have adequate procedures in place
to ensure that the required level of expenditures for non-public school students with disabilities was met for
each member school. The Cooperative did not have effective internal controls to ensure non-public school
expenditures were appropriately identified and reported.
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 such, the earmarking requirements could not be verified as having been met.
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.
Context: The School Corporation is a member of the Greene Sullivan Special Education Cooperative
(Cooperative). During fiscal year 2021-2022 and 2022-2023, the Cooperative operated the special
education programs and spent the federal money on behalf of all its members. As the grant agreements
were between the Indiana Department of Education (IDOE) and each member school, the School
Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was
inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching,
Level of Effort, Earmarking compliance requirement.
Although the Cooperative has a separate object code to identify expenditures for the purpose of
proportionate share, there is no identifier or separate way to track which member school the funding was
expended for. As such, the Non-Public Proportionate Share expenditures for the 19611-022-PN01, 20611-
022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards could not be verified for the individual
member schools. Additionally, the Cooperative did not obtain a waiver from the Indiana Department of
Education for the amount unspent for the requirement on the 19611-022-PN01 and 20611-022-PN01 grant
awards. For the 21611-022-PN01 grant award, a waiver was obtained from the IDOE which was used to
cover a portion of the member school's required proportionate share amount; however, the remaining
amount, which the Cooperative claimed to have expended, could not be traced to documentation that
indicated which member school the expenditure was applied to. For the 22611-022-PN01 grant award, no
waiver was obtained, and the amounts spent could not be traced to documentation that indicated which
member school the expenditure was applied to. Also, the total amount expended for proportionate share
was less than the total amount required when all member school proportionate share requirements were
totaled.
The lack of internal controls and noncompliance were isolated to the 19611-022-PN01, 20611-022-PN01,
21611-022-PN01, and 22611-022-PN01 grant awards. The minimum earmarking requirement for the
19611-022-PN01, 20611-022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards were $1,931,
$3,486, $6,832, and $1,794, respectively. FINDING 2023-003 (Continued)
Identification as a repeat finding: No
Recommendation: We recommended that management of the School Corporation establish a proper
system of internal controls and develop policies and procedures to ensure non-public proportionate share
funds are appropriately allocated to the member school based on expenses charged directly on behalf of
the member school. Supporting documentation for these expenses should be retained for audit.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.