FINDING 2024-005
Subject: Special Education Cluster (IDEA) - Earmarking
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, COVID-19 - Special Education
Grants to States, Special Education Preschool Grants
Assistance Listings Numbers: 84.027A, 84.027X, 84.173A
Federal Award Numbers and Years (or Other Identifying Numbers): 21611-026-PN01, 21619-026-PN01,
22611-026-PN01, 22611-026-ARP,
22619-026-PN01, 23619-026-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Matching, Level of Effort, Earmarking
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The School Corporation is a member of the Harrison County Exceptional Learners Cooperative
(Cooperative). During both fiscal years under audit, the Cooperative operated the special education
programs and spent federal money on behalf of all its members. As the grant agreements were between
the Indiana Department of Education (IDOE) and each member school, the School Corporation was
responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate
oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of
Effort, Earmarking compliance requirement.
The School Corporation did not have internal controls in place to ensure that the Cooperative
complied with the earmarking requirements. The Cooperative did not have adequate procedures in place
to ensure that the required level of expenditures for nonpublic school students with disabilities was met for
each member school. The Cooperative did not have effective internal controls to ensure nonpublic school
expenditures were appropriately identified and reported.
The Non-Public Proportionate Share expenditures for the 21611-026-PN01, 21619-026-PN01,
22611-026-PN01, 22611-026-ARP, 22619-026-PN01, and 23619-026-PN01 grant awards could not be
verified for the individual member schools. Total grant expenditures were posted as expended. The
nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic
school budgeted expenditures. These were the amounts reported to the IDOE. As such, the Indiana State
Board of Accounts was unable to identify if the minimum amount per the grant award was expended and
properly reported to the IDOE as required.
The 22611-026-PN01, 22611-026-ARP, 22619-026-PN01, and 23619-026-PN01 grant awards
ended during the audit period. The School Corporation did not have internal controls in place to ensure
that the Cooperative fully spent the required nonpublic proportionate share amounts by the end of the grant
award. The following schedule shows the total nonpublic proportionate share approved by the IDOE for all
member corporations for each grant award compared with the total expenditures posted to the ledger for
nonpublic proportionate share. The remaining difference of $13,595.71 is nonpublic proportionate share
money not spent by the Cooperative on behalf of member schools by the end of the grant award for all
awards ending during the audit period.
INDIANA STATE BOARD OF ACCOUNTS
25
SOUTH HARRISON COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Grant Award/ IDOE Approved Non- Total Non-Public Proportionate
Project No. Public Proportionate Share Share Spent by Cooperative Difference
22611-026-PN01 $ 47,289.04 $ 40,688.11 $ 6,600.93
22611-026-ARP 10,585.73 5,233.83 5,351.90
22619-026-PN01 1,952.05 1,263.05 689.00
23619-026-PN01 3,949.95 2,996.07 953.88
Total $ 63,776.77 $ 50,181.06 $ 13,595.71
The lack of internal controls and noncompliance were isolated to the 21611-026-PN01, 21619-026-
PN01, 22611-026-PN01, 22611-026-ARP, 22619-026-PN01, and 23619-026-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
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 200.403 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."
INDIANA STATE BOARD OF ACCOUNTS
26
SOUTH HARRISON COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
The School Corporation's Director of Business Operations/Treasurer, who was also the fiscal agent
for the Cooperative, stated that the amounts attributed to member corporations for nonpublic proportionate
share had been calculated for many years using the methodology noted above. She was unaware that
such an allocation was not allowed until the issue was identified for the grants ending in fiscal year
2022-2023 and was not able to correct the issue for the grants ending in 2023-2024. The School
Corporation had the option to apply for a waiver to allow the unspent portion of nonpublic proportionate
share funds to be used for other grants purposes, but she indicated that the School Corporation was told
that it would not matter and that the School Corporation would still have been in noncompliance.
Effect
Without a proper system of internal controls in place that operated effectively, the School
Corporation was unable to ensure that the Cooperative properly tracked nonpublic proportionate share
expenditures in a manner that would allow us to verify that the Earmarking requirements of the federal
award had been met. Due to the lack of proper oversight from the School Corporation, the Cooperative
also did not fully spend the required nonpublic proportionate share amounts on behalf of the School
Corporation. 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 funds to 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 develop policies and procedures to ensure nonpublic proportionate share funds are
properly accounted for by the Cooperative based on expenditures charged directly on behalf of the member
school. Supporting documentation for these expenditures should be retained for audit. We also
recommend tracking total nonpublic proportionate share by approved grant amounts from the IDOE to
ensure proportionate share is being spent by the end of the grant award.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.