Finding Text
Information on the federal program:
Subject: Education Stabilization Fund – Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 – Education Stabilization Fund
Assistance Listing Number: 84.425C, 84.425D, 84.425U
Federal Award Numbers: S425C200018, S425D200013, S425D210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
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)...."
Condition: The School Corporation did not have internal controls in place to ensure that the School Corporation complied with the Activities Allowed or Unallowed, Allowable Costs/Cost Principles compliance requirements.
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 design or implementation of the components of a system of internal control, including policies and procedures that provide segregation of duties and additional oversight as needed, the control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance.
Questioned Costs: There were $82,276 of questioned costs identified. There were $78,462 of ESSER II funds that were drawn down in advance of the disbursement taking place, $3,013 of GEER funds drawn down in advance of the disbursement taking place, and $801 of questioned costs pertaining to payroll charges to the grant that were not supported by contracts and/or timecards.
Context: In our testing of disbursements charged to the Education Stabilization Fund grants, we noted the ESSER II grant award, tracked in Fund 7931 has a positive cash balance at June 30, 2023. We were able to tie out the disbursements reported on the Annual Financial Report to underlying detail. We noted the School Corporation had drawn down $78,462 of ESSER II funds in advance of the expenditures taking place.
The GEER grant award, which is tracked in Fund 7940, had a positive cash balance of $36,013 at June 30, 2023. This was a result of $33,000 of expenditures pertaining to the GEER fund being incorrectly recorded
in the Operating fund during the year, rather than the applicable GEER fund. The remaining $3,013 is due to drawing down funds in advance of the expenditures taking place.
During our testing payroll disbursements, we noted three selections in a sample of 60 payroll disbursements for which management was unable to provide adequate documentation to support the amounts disbursed to the employees. The employee in question went on medical leave during the school year, but continued to receive payments over the remaining months. Management was unable to provide an adjusted contract that agreed to the amounts being paid to the employee. These issues resulted in questioned costs of $801.
Identification as a repeat finding: No
Recommendation: We recommended that management of the School Corporation design and implement a proper system of internal control, including policies and procedures, that are documented that would provide segregation of duties to ensure appropriate reviews, approvals and oversight are taking place to support disbursements that are charged to the respective grants as well as amounts being requested for draw downs.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.