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FINDING 2022-004Subject: Special Education Cluster (IDEA) - EarmarkingFederal Agency: Department of EducationFederal Program: Special Education Grants to StatesAssistance Listings Number: 84.027Federal Award Number and Year (or Other Identifying Number): 21611-009-PN01Pass-Through Entity: Indiana Department of EducationCompliance Requirement: Matching, Level of Effort, EarmarkingAudit Findings: Material Weakness, Modified OpinionCondition and ContextThe School Corporation is a member of the Exceptional Children's Co-op (Cooperative). Duringfiscal year 2021-2022, the Cooperative operated the special education programs and spent the federalmoney on behalf of all its member schools. As the grant agreements were between the Indiana Departmentof Education (IDOE) and each member school, the School Corporation was responsible for ensuring andproviding oversight of the Cooperative. There was inadequate oversight performed by the SchoolCorporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliancerequirement.The School Corporation did not have internal controls in place to ensure that the Cooperativecomplied with the earmarking requirements. The Cooperative did not have adequate procedures in placeto ensure that the required level of expenditures for non-public school students with disabilities was met foreach member school. The Cooperative did not have effective internal controls to ensure non-public schoolexpenditures were appropriately identified and reported.The Non-Public Proportionate Share expenditures for the 21611-009-PN01 grant award could notbe verified for the individual member schools. Total grant expenditures were posted as expended. Thenon-public proportionate share expenditures were determined by applying a percentage to the non-publicschool budgeted expenditures. These were the amounts reported to the IDOE. As such, we were unableto identify if the minimum amount per the grant award was expended and properly reported to the IDOE asrequired.The lack of internal controls and noncompliance was isolated to the 21611-009-PN01 grant award.Criteria2 CFR 200.303 states in part:"The non-Federal entity must:(a) Establish and maintain effective internal control over the Federal award that providesreasonable assurance that the non-Federal entity is managing the Federal award incompliance with Federal statutes, regulations, and the terms and conditions of the Federalaward. These internal controls should be in compliance with guidance in 'Standards forInternal Control in the Federal Government' issued by the Comptroller General of theUnited States or the 'Internal Control Integrated Framework', issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO). . . ."INDIANA STATE BOARD OF ACCOUNTS21SOUTHWEST DUBOIS COUNTY SCHOOL CORPORATIONSCHEDULE OF FINDINGS AND QUESTIONED COSTS(Continued)2 CFR 200.403 states in part:"Except where otherwise authorized by statute, costs must meet the following general criteriain 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 adjustspecific 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 nonpublicschools must expend at least an amount that is the same proportion of the public agency totalsubgrant 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 totalnumber of students with disabilities of the same age range."CauseThe School Corporation's management had not developed an effective system of internal controlsthat would have ensured compliance with the grant agreements and the earmarking requirements of theMatching, Level of Effort, Earmarking compliance requirement.EffectThe failure to establish an effective internal control system, as well as adequately document costsof federal awards, prevented the determination of the School Corporation's compliance with the earmarkingrequirements of the Matching, Level of Effort, Earmarking compliance requirement.Questioned CostsThere were no questioned costs identified.RecommendationWe recommended that the School Corporation's management establish an effective system ofinternal controls, as well as appropriately document and identify federal award expenditures to ensure compliancewith the Matching, Level of Effort, Earmarking compliance requirement.Views of Responsible OfficialsFor the views of responsible officials, refer to the Corrective Action Plan that is part of this report.