FINDING 2024-003
Subject: Special Education Cluster (IDEA) - Activities Allowed
or Unallowed, Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, COVID-19 - Special Education
Grants to States, COVID-19 - Special Education Preschool Grants
Assistance Listings Numbers: 84.027, 84.173
Federal Award Numbers and Years (or Other Identifying Numbers): 22611-047-PN01, 22611-047-ARP,
22619-047-ARP
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
During fiscal year 2023-2024, 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. 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.
For costs related to nonpublic schools, the practice of the Cooperative was to separate out the
required amount for each member school from the Cooperative budget, and the member schools would
work with the nonpublic schools to determine how to spend its proportionate share amount. Each member
school would then request reimbursement from the Cooperative for nonpublic school expenditures incurred.
This allowed both the Cooperative and member schools to maintain control of all special education funds,
property, equipment, and supplies.
In the initial sample of 25 expenditures, there was no noncompliance identified. However, while
performing a review of transactions for the Period of Performance compliance requirement, it was noted
that nonpublic schools received direct reimbursements from the Cooperative for its proportionate share
expenditures. A total of 13 expenditures were made from special education funds to nonpublic schools on
behalf of the member schools during the audit period. Of the 13 expenditures, 5, totaling $2,798, were
made on behalf of the School Corporation to a nonpublic school.
The lack of internal controls and noncompliance was isolated to the 22611-047-PN01,
22611-047-ARP, 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). . . ."
34 CFR 300.202(a) states:
"General. Amounts provided to the LEA under Part B of the Act–
(1) Must be expended in accordance with the applicable provisions of this part;
(2) Must be used only to pay the excess costs of providing special education and related
services to children with disabilities, consistent with paragraph (b) of this section; and
(3) Must be used to supplement State, local, and other Federal funds and not to supplant
those funds."
34 CFR 300.208 states:
"(a) Uses. Notwithstanding §§ 300.202, 300.203(b), and 300.162(b), funds provided to an
LEA under Part B of the Act may be used for the following activities:
(1) Services and aids that also benefit nondisabled children. For the costs of special
education and related services, and supplementary aids and services, provided in a
regular class or other education-related setting to a child with a disability in accordance
with the IEP of the child, even if one or more nondisabled children benefit from these
services.
(2) Early intervening services. To develop and implement coordinated, early intervening
educational services in accordance with § 300.226.
(3) High cost special education and related services. To establish and implement cost or
risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in
a consortium of which the LEA is a part, to pay for high cost special education and
related services.
(b) Administrative case management. An LEA may use funds received under Part B of the
Act to purchase appropriate technology for recordkeeping, data collection, and related case
management activities of teachers and related services personnel providing services described
in the IEP of children with disabilities, that is needed for the implementation of those case
management activities."
34 CFR 300.800 states:
"The Secretary provides grants under section 619 of the Act to assist States to provide special
education and related services in accordance with Part B of the Act–
(a) To children with disabilities aged three through five years; and
(b) At a State's discretion, to two-year-old children with disabilities who will turn three
during the school year."
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. . . ."
511 IAC 7-34-9 states in part:
"(a) The public agency must hold title to and exercise continuing administrative control of all:
(1) property;
(2) equipment; and
(3) supplies;
the public agency acquires with Part B funds for the benefit of nonpublic school students with
disabilities.
(b) The public agency may place equipment and supplies in a nonpublic school for the period
of time needed to provide special education and related services. The public agency must
ensure that the equipment and supplies:
(1) are used only for the provision of special education and related services; and
(2) can be removed from the nonpublic school without remodeling the nonpublic school
facility."
Cause
Management was not aware that nonpublic school officials have no authority to obligate or receive
federal funds and that School Corporation must maintain control of all special education funds, property,
equipment, and supplies; therefore, reimbursements were made to a nonpublic school for proportionate
share expenditures.
Effect
The payment of proportionate share expenditures to a nonpublic school resulted in the potential
misuse of funds that were meant to pay the excess costs of providing special education to students. The
unallowable nature of these expenditures may also result in the School Corporation not meeting its requirements
related to Non-Public Proportionate Share for the respective grants.
Questioned Costs
There were questioned costs identified in the amount of $17,857.
Recommendation
We recommended that the School Corporation's management establish a system of internal
controls to ensure that no direct reimbursements are made to the nonpublic schools and to ensure compliance
with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost
Principles compliance requirements.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.