Finding Text
FINDING 2024-004
Subject: COVID-19 - Education Stabilization Fund - 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): S425D200013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
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 compliance with requirements related to the grant agreement
and the following compliance requirement: Allowable Costs/Cost Principles.
Federal funds may only be used to pay staff for work that has occurred supporting the objective of
the federal program. As such, proper time and effort documentation is to be maintained by the School
Corporation. The purpose of time and effort recording is to provide documentation of the time spent working
on specific federal programs to ensure charges are accurate for each program.
Reimbursements were prepared by one employee and reviewed by another employee prior to
submission; however, this internal control was not effective in preventing noncompliance with allowable
costs/cost principles.
INDIANA STATE BOARD OF ACCOUNTS
22
MT. VERNON COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Out of 14 employees tested, 1 employee was paid 50 percent of their salary from the COVID-19 -
Education Stabilization Funds (ESF) grant and 50 percent of their salary from another funding source. The
School Corporation was not able to provide documentation that supported the hours paid from the ESF
grant.
The ineffective internal controls were systemic throughout the audit period. The noncompliance
was isolated to payrolls for September and October of 2022.
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 200.430(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 . . .
(iv) Encompass federally-assisted and all other activities compensated by the recipient
or subrecipient on an integrated basis but may include the use of subsidiary records
as defined in the recipient's or subrecipient's written policy; . . .
(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. . . ."
INDIANA STATE BOARD OF ACCOUNTS
23
MT. VERNON COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
While across the board stipends are not permitted, LEAs may pay staff for COVID-related work that
has been documented. Most, if not all, staff likely had extra responsibilities as well as time and effort to
respond to the pandemic. ESSER funds can be used to pay staff for that work and LEAs are responsible
for documenting that this work occurred. (Indiana Department of Education, ESSER III Frequently Asked
Questions (FAQs) updated August 16, 2021)
Cause
A proper system of internal controls over the payroll disbursements for employees who worked with
both federal and nonfederal programs was not properly designed or implemented by management. The
School Corporation did not maintain a record of the actual time spent working on extra responsibilities for
COVID-related work to ensure allowability.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, the proper allocation could not be determined for reimbursements for one
employee's payroll for September and October of 2022.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management design and implement a system of
internal controls to ensure that disbursement documentation will be obtained, retained, and made available
for audit and that the disbursements comply with the Allowable Costs/Cost Principles compliance
requirement.