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FINDING 2022-005 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grant to States Assistance Listings Number: 84.027 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-112-PN01, 20611-112-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. For grant awards 19611-112-PN01 and 20611-112-PN01, the School Corporation was required to spend $2,883 and $2,718, respectively, on expenditures for non-public students with disabilities (non-public services). The School Corporation could not provide documentation to support the expenditures made for non-public services. The lack of internal controls and noncompliance were isolated to the 19611-112-PN01 and 20611-112-PN01 grant awards. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 20 ROCHESTER 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). . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools and facilities, 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 or facilities within its boundaries, is to the total number of students with disabilities of the same age range." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." Cause Management had not established an effective system of internal controls that would have ensured compliance with the Matching, Level of Effort, Earmarking compliance requirement. Effect The failure to establish an effective internal control system, as well as adequately document costs of federal awards, prevented the determination of the School Corporation's compliance with the earmarking requirements of the Matching, Level of Effort, Earmarking compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and comply with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.