Finding 499060 (2023-002)

FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425U Federal Award Number and Year (or Other Identifying Number): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-003. Condition and Context The School Corporation was required to submit an annual data report to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditure, and expenditures per activity. During the audit period, the School Corporation submitted one ESSER I report, one ESSER II report, and one ESSER III report, for a total of three reports. The annual data reports were prepared by the Director of Grants and reviewed by the Chief Academic Officer; however, this process did not allow for the prevention, or detection and corrections, of errors prior to submission. Due to the lack of effective internal controls, one of the three annual data reports was not supported by the School Corporation's records. For the ESSER III report, which covered the period of July 1, 2021 to June 30, 2022, total expenses per the report were $6,026,425. However, the ledger had total expenses for the award, for that period, of $6,686,286. The lack of effective internal controls and noncompliance were isolated to the ESSER III report. 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 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . INDIANA STATE BOARD OF ACCOUNTS 21 METROPOLITAN SCHOOL DISTRICT OF LAWRENCE TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." 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 Corporations 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, the ESSER III report was not supported by the School Corporation's records. 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 by 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 strengthen its policies and procedures to ensure all reports submitted on behalf of the Education Stabilization Fund program funds are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.