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FINDING 2022-001 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: S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 15 METROPOLITAN SCHOOL DISTRICT OF NORTH POSEY COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Equipment and Real Property Management compliance requirement. A property record or capital asset listing which would include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. The School Corporation's capitalization threshold was set at $500. The assets purchased during the audit period from the ESSER II grant award were not included in the School Corporation's capital asset listing. Expenditures included 90 Virtual Reality headsets, 9 vacuum cleaners, and 1 self-contained cleaning unit. Total acquisition cost of these assets was $54,731. Additionally, a physical inventory of equipment had not been performed in the last two years. The lack of internal controls and noncompliance were systemic issues throughout the audit period. 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: ". . . (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. . . ." Cause Management had not established a system of internal controls that would have ensured compliance or that adequate documentation would have been maintained and made available for audit related to the grant agreement and the Equipment and Real Property Management compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 16 METROPOLITAN SCHOOL DISTRICT OF NORTH POSEY COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to retain and provide appropriate documentation prevented the determination of the School Corporation's compliance with the compliance requirement listed above. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and comply with the grant agreement and the Equipment and Real Property Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.