FINDING 2022-006 Subject: Title I Grants to Local Educational Agencies - Cash Management and Reporting Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A190014, S010A200014, S010A210014 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Cash Management, Reporting Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding related to Reporting from the immediately prior audit report. The prior audit finding number was 2020-007. INDIANA STATE BOARD OF ACCOUNTS 32 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with the requirements related to the grant agreement and the Cash Management and the Reporting compliance requirements. The School Corporation filed the required special reports with the Indiana Department of Education; however, none of the reports were supported by the School Corporation's records. Although the Title I Director reviewed the requests for reimbursement and the Final Expenditure Reports, the reviews did not ensure that the reports agreed to the School Corporation's financial records. The 2019-2020 and 2020-2021 Final Expenditure Reports and the four reimbursement requests tested could not be traced to the School Corporation's records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. 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 200.333 (Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(b) (Uniform Guidance) states in part: . . . "The financial management system of each non-Federal entity must provide for the following: INDIANA STATE BOARD OF ACCOUNTS 33 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.327 Financial reporting. . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 2 CFR 200.302(b) (Revised Uniform Guidance) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 2 CFR 200.305(b) (Uniform Guidance) states in part: "For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. . . . (3) Reimbursement is the preferred method when the requirements in paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per ? 200.207 Specific conditions, or when the non-Federal entity requests payment by reimbursement. . . ." 2 CFR 200.305(b) (Revised Uniform Guidance) states in part: "For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. . . . (3) Reimbursement is the preferred method when the requirements in paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per ? 200.208, or when the non-Federal entity requests payment by reimbursement. . . ." Cause Management had not established an effective system of internal controls that would have ensured compliance with requirements related to the Cash Management and the Reporting compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 34 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective system of internal controls and to retain and provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish an effective system of internal controls to ensure documentation be maintained and made available for audit related to the grant agreement and the Cash Management and the Reporting compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.