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FINDING 2022-005 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): 19611-127-PN01, 20611-127-PN01, 19619-127-PN01, 20619-127-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 immediately prior audit. The prior audit finding number was 2020-010. 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 Matching, Level of Effort, Earmarking compliance requirement. Proportionate share is an amount of funds that must be expended on special education/related services for parentally-placed private school and homeschooled students. The amount to be spent is automatically calculated within each grant application. The School Corporation had not designed, nor implemented policies and procedures to ensure that the required level of expenditures for non-public students was met for each grant. The School Corporation failed to maintain records of actual time spent providing services to the participating nonpublic schools for Non-Public Proportionate Share expenditures for the 19611-127-PN01, 19619-127-PN01, 20611-127-PN01, and 20619-127-PN01 grant awards. The salaries reported as expended for the nonpublic school expenditures were based on an estimate of time instead of actual time spent. As such, we could not verify that the minimum amount per grant award was expended. The lack of internal controls and noncompliance were isolated to the 19611-127-PN01, 19619-127-PN01, 20611-127-PN01, and 20619-127-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 awards. 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 Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Effect The failure to establish an effective internal control system, as well as adequately document costs of federal awards, prevented the determination of the School Corporation's compliance with the earmarking requirements of the Matching, Level of Effort, Earmarking compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish internal controls, as well as appropriately document and identify federal award expenditures, to ensure compliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.