FINDING 2024-002
Subject: Special Education Cluster (IDEA) - Earmarking
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, Special Education Preschool
Grants, COVID-19 - Special Education Preschool Grants
Assistance Listings Numbers: 84.027, 84.173
Federal Award Numbers and Years (or Other Identifying Numbers): 21611-047-PN01, 21619-047-PN01,
22611-047-PN01, 22619-047-PN01,
22619-047-ARP
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Matching, Level of Effort, Earmarking
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 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 grant award.
The School Corporation was a member of the Cooperative School Services (Cooperative). The
Cooperative operated the special education programs and spent the federal money on behalf of its member
schools with a portion of the proportionate share being remitted to the member school for earmarking costs.
As the grant agreement was between the Indiana Department of Education and each member school, the
School Corporation was responsible for ensuring and providing oversight of the Cooperative.
The School Corporation did not have effective internal controls in place to ensure that the required
level of expenditures for private school and homeschooled students as nonpublic students were met. The
School Corporation received the full earmarking amount from the Cooperative for grant award
21611-047-PN01 and a portion of grant award 22611-047-PN01. The School Corporation spent only a
portion of the required proportionate share amount on allowable costs for each grant award tested in the
audit period. For grant awards 21611-047-PN01 and 22611-047-PN01, the School Corporation spent
$15,361 and $14,999, respectively, out of the required amount for the proportionate share of $48,324 and
$57,883, respectively.
For grant awards 21619-047-PN01, 22619-047-PN01, and 22619-047-ARP, the School
Corporation did not expend any amounts as these funds were spent and handled at the Cooperative. Time
and effort logs were not maintained to determine if the teachers paid from these funds were performing
duties for the nonpublic students; therefore, amounts charged to the grants were not based on actual time
spent for the nonpublic students as required. The School Corporation required amount of proportionate
share for grant awards 21619-047-PN01, 22619-047-PN01, and 22619-047-ARP was $926, $1,913, and
$1,009, respectively.
The lack of internal controls and noncompliance were isolated to 21611-047-PN01,
21619-047-PN01, 22611-047-PN01, 22619-047-PN01, and 22619-047-ARP 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."
Cause
Through management inquiry, there was confusion at the School Corporation as to whether the
Cooperative or the School Corporation handled what portions of the nonpublic proportionate share expenditures.
Upon further inquiry, it was determined that the School Corporation handles the portion for the 611
grants by receiving funds from the Cooperative, and the Cooperative handles the 619 grants. However,
proper time and effort logs were not maintained for expenditures used to meet the earmarking requirements;
therefore, the School Corporation was not able to meet the required earmarking requirements.
Effect
Without the proper implementation of an effectively designed system of internal controls, the School
Corporation was unable to ensure compliance with earmarking requirements.
Questioned Costs
There were no questioned costs identified.
Recommendation
Management of the School Corporation should develop written policies and procedures which
would require tracking of actual nonpublic proportionate share expenditures. Documentation should be
maintained to show how these expenditures are being tracked to ensure compliance with the earmarking
requirements.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.