Finding Text
FINDING 2024-005
Subject: COVID-19 - Education Stabilization Fund - Activities Allowed
or Unallowed, Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U200013
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Condition and Context
An effective internal control system, which would include segregation of duties, was not in place at
the School Corporation in order to ensure payroll and vendor payments paid from the COVID-19 - Education
Stabilization Fund was allowable and in conformance with the cost principles.
The School Corporation did not implement or maintain supporting documentation of the reviews or
approval by a knowledgeable person to ensure allowability and conformance with cost principles for payroll
and vendor disbursements from the COVID-19 - Education Stabilization Fund grants.
The lack of internal controls was a systematic issue during the audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
INDIANA STATE BOARD OF ACCOUNTS
24
LIBERTY-PERRY COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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). . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include appropriate segregation of duties. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures. The
School Corporation has policies to establish internal controls and procedures, but did not establish proper
internal controls.
Effect
The failure to establish an effective internal control system could enable material noncompliance
to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and
the Allowable Costs/Cost Principles compliance requirements could have resulted in the loss of federal
funds.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management establish a system of internal
controls, including segregation of duties, related to the grant agreement and the compliance requirements
listed above. An internal control system, including segregation of duties, should be designed and operate
effectively to provide reasonable assurance that material noncompliance with the grant agreement or a
compliance requirement of a federal program will be prevented, or detected and corrected, on a timely
basis. In order to have an effective internal control system, it is important to have proper segregation of
duties. This is accomplished by making sure proper oversight, reviews, and approvals take place and to
have a separation of functions over certain activities related to the program. The fundamental premise of
segregation of duties is that an individual or small group of individuals should not be in a position to initiate,
approve, undertake, and review the same activity.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.