FINDING 2024-005
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: 84.425
Federal Award Number and Year (or Other Identifying Number): S425D210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-004.
INDIANA STATE BOARD OF ACCOUNTS
21
SCOTT COUNTY SCHOOL DISTRICT 1
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Condition and Context
A property record or capital asset listing would include the following for each asset: 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, use and condition of the property, and any ultimate disposition data
including the date of disposal and sale price of the property. The property record or capital asset listing
should be maintained for assets purchased that exceed the School Corporation's capitalization threshold.
The School Corporation maintained a detailed listing of capital assets; however, the asset records
provided for audit did not include all assets purchased with the COVID-19 - Education Stabilization Fund
award. The School Corporation paid for the HVAC systems totaling $234,000 with Education Stabilization
Funds during the audit period. These assets were not added to a detailed listing of capital assets that
would include a description of the property, a serial number or other identification number, the source of
the funding for the property (including the federal award identification number (FAIN)), who holds title, the
acquisition date, cost of property, the location, and the use and condition of the property. In addition, a
physical inventory had not been taken in the past two years and assets were not properly safeguarded and
maintained.
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:
"Management requirements. Procedures for managing equipment (including replacement
equipment), whether acquired in whole or in part under a Federal award, until disposition takes
place will, as a minimum, meet the following requirements:
(1) Property records must be maintained that include a description of the property, a serial
number or other identification number, the source of the funding of 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 date 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.
INDIANA STATE BOARD OF ACCOUNTS
22
SCOTT COUNTY SCHOOL DISTRICT 1
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(3) A control system must be developed to ensure adequate safeguards to prevent loss,
damage, or theft of the property. Any loss, damage, or theft must be investigated.
. . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation
to ensure that a physical inventory of all capital assets was conducted at least every two years and
reconciled back to the detailed listing. The lack of physical inventory resulted in some assets purchased
with federal funds to be omitted from the detailed listing. Policies and procedures were not in place to make
sure that the detailed capital assets listing included all required information.
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 School Corporation had not properly included real property purchased with
federal dollars on the asset listing and the asset listing did not include all the required information. In
addition, a physical inventory was not conducted every two years so that the asset listing could be verified.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management establish a proper system of internal
controls, and develop procedures to ensure asset records include all the necessary information and that a
physical inventory is conducted every two years as required.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.