Finding Text
FINDING 2023-009
Subject: COVID-19 - Education Stabilization Fund - Activities Allowed
or Unallowed, Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Number: 84.425D
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Condition and Context
The Elementary and Secondary School Emergency Relief (ESSER) Fund provided funding to
states and school districts to help safely reopen and sustain the safe operation of schools and to address
the impact of the coronavirus pandemic on the nation's students. States were required to subgrant a portion
of their ESSER allocation to Local Educational Agencies (LEA). Prior to the LEAs receiving their respective
subgrants, the LEAs were required to complete an application for ESSER funding, which was submitted to
the Indiana Department of Education, the pass-through entity for approval. The application included a
district level budget identifying how the LEA intended to spend program funds.
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 related to the vendor, payroll, and payroll benefit costs charged
to the grant.
The Accounts Payable Specialist entered all the grant disbursement information into the financial
software system from invoices to process vendor payments. Prior to checks being issued, the financial
software system required approval by the Treasurer to complete the disbursement process. However,
documentation of the approval process could not be provided. In addition, an oversight or review after
disbursements were processed was not performed.
The payroll distribution reports reviewed by the Superintendent of Schools and the Treasurer for
accuracy did not contain the fund or account number to ensure the classification and presentation of the
payroll disbursements posted to the grant funds.
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 was not implemented 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.
Questioned Costs
There were no known questioned costs.
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.