Finding Text
Information on the federal program:
Subject: Education Stabilization Fund (ESSER) – Internal Controls
Federal Agency: Department of Education
Federal Program: COVID-19 – Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Finding: Material Weakness
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:
(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto
under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to
types or amount of cost items. . . .
(g) Be adequately documented. . . ."
2 CFR 200.430(i) states in part:
"Standards for documentation of Personnel Expenses
(1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the
work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-
Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's
definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among
specific activities or cost objectives if the employee works on more than one Federal award;
a Federal award and non-Federal award; an indirect cost activity and a direct cost activity;
two or more indirect activities which are allocated using different allocation bases; or an
unallowable activity and a direct or indirect cost activity. . . ."
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Allowable Costs/Cost
Principles compliance requirements.
Cause: The School Corporation’s management had not developed an effective system of internal controls
that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles
compliance requirement.
Effect: The failure to establish an effective system of internal controls enabled noncompliance to go
undetected. Noncompliance with the grant agreement and the Allowable Costs/Cost Principles compliance
requirement could result in the loss of future federal funds to the School Corporation.
Questioned Costs: There were $1,944 of known questioned costs identified.
Context: During testing of the Allowable Costs/Cost Principles compliance requirements, there were two
vendor vouchers in a sample of 60, where the School Corporation was unable to locate any supporting
documentation. These two selections totaled $1,530 charged to the grant.
It was further noted that during our testing of payroll costs charged to the COVID-19 – Education
Stabilization Fund, for 2 selections in a sample of 40, the School Corporation was unable to provide any
support to validate the amount of payroll charged to the grant. These two selections totaled $414 charged
to the COVID-19 – Education Stabilization Fund.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation’s management establish a system of internal
controls to ensure that documentation will be maintained and that expenditures charged to the grant comply
with the grant agreement and the Allowable Costs/Cost Principles compliance requirement.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.