Finding Text
FINDING 2023-009
Subject: Special Education Cluster (IDEA) - Earmarking
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, Special Education Preschool Grants
Assistance Listings Numbers: 84.027, 84.173
Federal Award Numbers and Years (or Other Identifying Numbers): 20611-054-PN01, 21611-054-PN01,
21619-054-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Matching, Level of Effort, Earmarking
Audit Findings: Material Weakness, Modified Opinion
INDIANA STATE BOARD OF ACCOUNTS
32
WABASH CITY SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Condition and Context
The School Corporation is a member of the Wabash Miami Area Programs for Exceptional Children
(Cooperative). During fiscal years 2021-2022 and 2022-2023, the Cooperative operated the special
education programs and spent the federal money on behalf of all its members. As the grant agreements
were between the Indiana Department of Education (IDOE) and each member school corporation, the
School Corporation was responsible for ensuring and providing oversight of the Cooperative. However,
there was inadequate oversight performed by the School Corporation in order to ensure compliance with
the Matching, Level of Effort, Earmarking compliance requirement.
The School Corporation did not have internal controls in place to ensure that the Cooperative
complied with the earmarking requirements. The Cooperative did not have adequate procedures in place
to ensure that the required level of expenditures for nonpublic school students with disabilities was met for
each member school corporation. The Cooperative did not have effective internal controls to ensure nonpublic
school expenditures were appropriately identified and reported.
The Non-Public Proportionate Share expenditures for the 20611-054-PN01, 21611-054-PN01, and
21619-054-PN01 grant awards could not be verified for the individual member school coporations. The
nonpublic school share funds for all member schools were comingled and the aggregate amount of
expenditures was then allocated to the member school corporations on a percentage basis. These
allocations were the amounts reported to the IDOE. As such, we were unable to identify which expenditures
were for each school in order to verify the minimum amount per the grant award was expended and properly
reported to the IDOE as required.
The lack of internal controls and noncompliance were isolated to the 20611-054-PN01,
21611-054-PN01, and 21619-054-PN01 grant awards.
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 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards: . . .
(g) Be adequately documented. . . ."
INDIANA STATE BOARD OF ACCOUNTS
33
WABASH CITY SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
511 IAC 7-34-7(b) states:
"The public agency, in providing special education and related services to students in nonpublic
schools must expend at least an amount that is the same proportion of the public agency total
subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities,
who are enrolled by their parents in nonpublic schools within its boundaries, is to the total
number of students with disabilities of the same age range."
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, it could not be determined if each school spent their required earmarking
dollars.
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.
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 Non-Public Proportionate Share funds are
appropriately allocated to the member school based on expenses charged directly on behalf of the member
school corporations. Supporting documentation for these expenses should be retained for audit.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.