Finding Text
FINDING 2024-002
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: 84.425U
Federal Award Number and Year (or Other Identifying Number): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
As part of sound management of the federal award, the School Corporation was responsible for
implementing a system of internal controls that would ensure compliance with the applicable requirements.
The School Corporation had not properly designed or implemented such a system.
The School Corporation was required to maintain a capital asset listing which would include a
description of the property, a serial number of 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 for assets purchased
that exceeded the School Corporation's capitalization threshold.
During the audit period, the School Corporation purchased one asset, a trailer, with COVID-19 -
Education Stabilization Fund grant funds that exceeded the School Corporation's capitalization threshold.
The School Corporation was not in compliance with the requirements of the federal award as adequate
property records were not maintained for the asset purchased. Additionally, with no detailed listing of its
capital assets, the School Corporation was unable to perform a physical inventory as required.
INDIANA STATE BOARD OF ACCOUNTS
19
SOUTH HARRISON COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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)(1) states:
"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 sales price of the property."
Cause
Management of the School Corporation acknowledged awareness of the requirement to maintain
a complete detailed listing of capital assets, including those purchased with federal funds. However, due
to time constraints, management had not been able to compile a list of assets purchased prior to the audit
period and had only accumulated invoices for items purchased during the audit period that need to be
added to the School Corporation's capital asset records.
Effect
Without a proper system of internal controls in place that operated effectively, the School
Corporation did not maintain capital asset records and, therefore, did not conduct a physical inventory, both
of which resulted in material noncompliance with the requirements of the federal award. The lack of capital
asset records and periodic physical inventories renders the School Corporation incapable of ensuring that
capital assets purchased with federal funds are properly safeguarded and maintained.
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 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 compile the required capital asset listing as well as conduct periodic physical inventories.
INDIANA STATE BOARD OF ACCOUNTS
20
SOUTH HARRISON COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.