Finding Text
FINDING 2023-003
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): 21611-007-PN01, 22611-007-PN01,
22619-007-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Matching, Level of Effort, Earmarking
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the prior audit report. The prior audit finding number was 2021-003.
Condition and Context
The School Corporation is a member of the Daviess-Martin Special Education Cooperative
(Cooperative). During fiscal year 2021-2022 and 2022-2023, the Cooperative operated the special education
programs and spent the federal money on behalf of all its member schools. As the grant agreements
were between the Indiana Department of Education (IDOE) and each member school, 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. 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 21611-007-PN01, 22611-007-PN01, and
22619-007-PN01 grant awards could not be verified for the individual member schools. Total grant expenditures
were posted as expended. The nonpublic proportionate share expenditures were then determined
by applying the budgeted percentage for nonpublic school expenditures to the total expenditures. These
were the amounts reported to the IDOE. As such, we were unable to identify if the minimum amount per
the grant awards was expended and properly reported to the IDOE as required.
The lack of internal controls and noncompliance was isolated to the 21611-007-PN01,
22611-007-PN01, and 22619-007-PN01 grant awards.
INDIANA STATE BOARD OF ACCOUNTS
22
WASHINGTON COMMUNITY SCHOOLS, INC.
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 200.403 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. . . ."
2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust
specific Federal award conditions as needed . . ."
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.
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.
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
23
WASHINGTON COMMUNITY SCHOOLS, INC.
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 Non-Public Proportionate Share funds are
appropriately allocated to the member school based on expenditures charged directly on behalf of the
member school. Supporting documentation for these expenditures 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.