Finding 388561 (2023-009)

Material Weakness
Requirement
F
Questioned Costs
-
Year
2023
Accepted
2024-03-29

AI Summary

  • Core Issue: The School Corporation lacks a proper system of internal controls for managing equipment and real property, leading to material noncompliance.
  • Impacted Requirements: Failure to maintain a capital asset ledger and conduct required physical inventories violates federal regulations (2 CFR 200.303 and 200.313).
  • Recommended Follow-Up: Establish effective internal controls and develop policies to ensure asset records are maintained and inventories are conducted every two years.

Finding Text

FINDING 2023-009 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Number and Year (or Other Identifying Number): S425D200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management 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 related to the Equipment and Real Property Management compliance requirement. The School Corporation made one equipment purchase, a school bus in the amount of $204,961, with grant funds. The school bus was acquired in June 2021, late in the prior audit period, and the expenditure was reimbursed under the ESSER II award in July 2021 in the current audit period. The School Corporation did not maintain a capital asset ledger during the audit period, so the equipment purchased was not properly added to an asset ledger or property record. In addition, while the bus was maintained and safeguarded from theft there was no identified internal controls that would prevent, or detect and correct, noncompliance with these requirements if they were to occur. The School Corporation did not perform a physical inventory of equipment at least once every two years as required. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 30 CROTHERSVILLE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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). . . ." 2 CFR 200.313 (d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. . . ." 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, a capital asset ledger was not maintained and the required inventory was not completed. 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. INDIANA STATE BOARD OF ACCOUNTS 31 CROTHERSVILLE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records are maintained and that a physical inventory is taken every two years. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Corrective Action Plan

Finding 2023-009 Finding Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Summary of Finding: The School Corporation made one purchase of equipment with grant funds, a school bus in the amount of $204,961. The school bus was acquired in June 2021, late in the prior audit period, and the expenditure was reimbursed under the ESSER II award in July 2021 in the current audit period. The lack of internal controls resulted in material noncompliance with the equipment requirements of the federal award. The School Corporation did not maintain a capital asset ledger during the audit period, so the equipment purchased was not maintained in the property records as required. Additionally, the School Corporation did not perform a physical inventory of equipment at least once every two years as required. The School Corporation did comply with the requirements to appropriately safeguard and maintain the equipment, but no key control was identified that would prevent, or detect and correct, noncompliance with these requirements if it were to occur. Contact Person Responsible for Corrective Action: Terry Richey and Chrystal Street Contact Phone Number and Email Address: 812.793.2061 trichey@crothersville.k12.in.us cstreet@crothersville.k12.in.us Views of Responsible Officials: We concur with the finding. Description of Corrective Action Plan: The corporation treasurer and the superintendent will investigate a capital asset program that we will be able to maintain ourselves. This might include reaching out to districts similar in size to see what they utilize or to work with an agency that can get us started. Anticipated Completion Date: April 1, 2024

Categories

Equipment & Real Property Management Internal Control / Segregation of Duties

Other Findings in this Audit

  • 388549 2023-003
    Material Weakness
  • 388550 2023-003
    Material Weakness
  • 388551 2023-004
    Material Weakness
  • 388552 2023-004
    Material Weakness
  • 388553 2023-005
    Material Weakness
  • 388554 2023-005
    Material Weakness
  • 388555 2023-006
    Material Weakness
  • 388556 2023-006
    Material Weakness
  • 388557 2023-007
    Material Weakness
  • 388558 2023-007
    Material Weakness
  • 388559 2023-008
    Material Weakness
  • 388560 2023-008
    Material Weakness
  • 388562 2023-010
    Material Weakness
  • 388563 2023-010
    Material Weakness
  • 388564 2023-010
    Material Weakness
  • 388565 2023-010
    Material Weakness
  • 964991 2023-003
    Material Weakness
  • 964992 2023-003
    Material Weakness
  • 964993 2023-004
    Material Weakness
  • 964994 2023-004
    Material Weakness
  • 964995 2023-005
    Material Weakness
  • 964996 2023-005
    Material Weakness
  • 964997 2023-006
    Material Weakness
  • 964998 2023-006
    Material Weakness
  • 964999 2023-007
    Material Weakness
  • 965000 2023-007
    Material Weakness
  • 965001 2023-008
    Material Weakness
  • 965002 2023-008
    Material Weakness
  • 965003 2023-009
    Material Weakness
  • 965004 2023-010
    Material Weakness
  • 965005 2023-010
    Material Weakness
  • 965006 2023-010
    Material Weakness
  • 965007 2023-010
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
10.555 National School Lunch Program 2023 $234,104
10.555 National School Lunch Program 2022 $218,463
84.425 Education Stabilization Fund 2023 $164,854
84.027 Special Education_grants to States 2023 $157,759
84.027 Special Education_grants to States 2022 $127,468
84.010 Title I Grants to Local Educational Agencies 2022 $108,294
84.010 Title I Grants to Local Educational Agencies 2023 $90,526
10.553 School Breakfast Program 2022 $48,228
10.553 School Breakfast Program 2023 $46,815
84.358 Rural Education 2022 $35,857
84.425 Education Stabilization Fund 2022 $34,731
84.358 Rural Education 2023 $34,498
84.287 Twenty-First Century Community Learning Centers 2022 $30,071
84.367 Improving Teacher Quality State Grants 2023 $16,376
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) 2022 $12,840
84.173 Special Education_preschool Grants 2023 $5,514
84.173 Special Education_preschool Grants 2022 $4,599
10.649 Pandemic Ebt Administrative Costs 2023 $628
10.649 Pandemic Ebt Administrative Costs 2022 $614