Finding Text
FINDING 2023-005
Subject: Special Education Cluster (IDEA) - Allowable Costs/Cost
Principles, Procurement and Suspension and Debarment
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States,
Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants
Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X
Federal Award Numbers and Years (or Other Identifying Numbers): 19611-113-PN01, 20611-113-PN01,
21611-113-PN01, 21619-014-PN01,
22611-113-PN01, 22619-014-PN01,
23611-113-PN01, 23619-014-PN01,
22611-113-ARP, 22619-113-ARP
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles, Procurement
and Suspension and Debarment
Audit Finding: Material Weakness
Condition and Context
Direct charges to a federal award are to be for allowable costs and made in conformance with the
applicable cost principles. In addition, procurements under federal awards are to be made in compliance
with applicable federal regulations and other procurement requirements specific to an award.
The School Corporation's process to ensure an expense was for an allowable cost in conformance
with the cost principles and procured appropriately was for the Deputy Treasurer or Grant Administrator to
prepare an Accounts Payable Voucher (APV), and the Corporation Treasurer to review and approve the
APV. To test the internal control for effectiveness, a sample of 40 APVs charged to the grant was selected
for testing. For 9 of the 40 APVs tested, there was not a documented review by the Corporation Treasurer.
As such, we determined the internal control as designed could not be effective at ensuring an expense was
for an allowable cost in conformance with the cost principles and procured appropriately
The lack of internal controls was a systemic issue 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). . . ."
Cause
A proper system of internal controls, which would include segregation of key functions, was not
implemented 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 design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.