Finding Text
FINDING 2022-003 Information on the federal program: Subject: Title I Grants to Local Educational Agencies ? Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listing Number: 84.010 Federal Award Numbers: S010A200014, S010A2100014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: "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 . . . (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 Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1-Compliance with compensation for personnel services requirements, page 2 states: "Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely 'Semi-Annual Certification' forms." Condition: The School Corporation had not established an effective internal control system related to the grant agreement and the Allowable Costs/Cost Principles compliance requirement. The School Corporation failed to comply with the allowable costs/cost principle requirements that employees who work 100 percent of their time on a federal award maintain semiannual certifications as required by the pass-through agency, and that employees who work on a federal award and a non-federal award have Program Activity Reports or equivalent documentation to support the distribution of their salaries or wages. Additionally, the School Corporation failed to properly document review and approval of all payroll distribution reports prior to salaries being paid. 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 internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement or the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Semiannual certifications are required by the pass-through agency. The required supporting documentation (Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation) for 37 of 40 payroll transactions selected for testing was not maintained properly. Payroll expenditures account for approximately $1.063 million of total program expenditures of $1.098 million. Additionally, support for review of payroll distribution reports for 1 of 7 pay dates selected for testing was not properly maintained. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the School Corporations' management establish controls to ensure compliance and comply with the Allowable Costs/Cost Principles compliance requirement including maintaining Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation to support payroll charges allocated to federal grants. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.