FINDING 2023-008
Subject: Title I Grants to Local Educational Agencies - Matching, Level of Effort, Earmarking
Federal Agency: Department of Education
Federal Program: Title I Grants to Local Educational Agencies
Assistance Listings Number: 84.010
Federal Award Numbers and Years (or Other Identifying Numbers) S010A190014, S010A200014,
S010A210014, S010A220014
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Matching, Level of Effort, Earmarking
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance.
Earmarking
A portion of the School Corporation's Title I allocation was required to be set aside for parental
involvement and homeless reservation. The required amount to be set aside was indicated in
the Title I grant application. The School Corporation is responsible for monitoring each required
set aside throughout the life of the grant to ensure the obligation is met.
There was no oversight or review process in place to ensure monitoring of each required set
aside. The School Corporation did not provide documentation to show that the obligation was
met, or not met, to service all the homeless students in the School Corporation and did not
transfer the unused funds to the next grant award.
Level of Effort - Individual Transactions (Vendor and Payroll)
Form 9 (financial) data was submitted by the School Corporation to the Indiana Department of
Education (IDOE) semi-annually. The data reported included the School Corporation's expenditures
recorded during that period. The IDOE calculated Maintenance of Effort based on the
expenditure information submitted on the Form 9 for that fiscal year. To verify amounts used
by the IDOE in its computation were derived from the records of the School Corporation, costs
were reviewed to ensure they were recorded properly as to account and object code and
reported correctly on the Form 9.
The School Corporation did not have an oversight process in place to ensure that expenditures
for payroll and vendor were posted to the correct fund, account, and object codes.
Level of Effort - Maintenance of Effort
The financial information submitted by the School Corporation to the IDOE through the Form 9
report, was used by the IDOE to calculate the School Corporation's Level of Effort -
Maintenance of Effort.
There was an oversight or review process at the School Corporation level over vendor and
payroll expenditures; however, the oversight and review process was not documented to
ensure the data used to complete the Form 9 was reported accurately in the correct fund,
account, and object code.
Level of Effort - Supplementing Not Supplanting
The School Corporation may use Title I funds only to supplement the funds that would, in the
absence of the Title I funds, be made available from state and local sources for the education
of students participating in a Title I program. To demonstrate compliance, the School
Corporation must demonstrate that it has a methodology (through written procedures) and
followed the methodology to allocate state and local funds to each Title I school. They also
must ensure that the Title I school received all the state and local funds it would otherwise
receive if it were not receiving Title I funds.
The School Corporation did not provide written procedures for the methodology used for the
FY 2021 and FY 2022 Title I applications. The School Corporation had not developed written
procedures for methodology; therefore, we were not able to determine how the School
Corporation allocated funding per each school.
The lack of internal controls and noncompliance were systemic 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). . . ."
20 USC 6313(c)(3)(A) states::
"A local educational agency shall reserve such funds as are necessary under this part,
determined in accordance with subparagraphs (B) and (C), to provide services comparable to
those provided to children in schools funded under this part to serve—
(i) homeless children and youths, including providing educationally related support
services to children in shelters and other locations where children may live;
(ii) children in local institutions for neglected children; and
(iii) if appropriate, children in local institutions for delinquent children, and neglected or
delinquent children in community day programs."
20 USC 6691 states: "Funds made available under this subchapter shall be used to supplement,
and not supplant, non-Federal funds that would otherwise be used for activities authorized under this
subchapter."
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, proper documentation was not maintained to ensure the obligation to service
homeless students was met or unmet. In addition, a written methodology of the allocation of state and local
funds to each Title I school was not provided.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of future federal funds to the School Corporation.
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 to ensure compliance.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.