FINDING 2022-006
Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Number: 84.425D
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
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INDIANA STATE BOARD OF ACCOUNTS
SOUTH BEND COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Condition and Context
The Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic
Security (CARES) Act, and further funded by the Coronavirus Response and Relief Supplemental
Appropriations Act (CRSSA) and the American Rescue Plan (ARP) Act, was for the purpose of preventing,
preparing for, or responding to the novel coronavirus.
Costs charged to grant funds must be adequately documented. To adequately document payroll
expenses charged to the grant fund, contracts or other documentation supporting the employees' approved
rates of pay are necessary.
The School Corporation utilized a financial software system that has two different sides, an
employee portal side and an administrator side. Employee contracts are approved by the employee, the
Superintendent of Schools, and the President of the School Board within the system on the employee portal
side. Once approved, the data in the employee portal side is fed into a process in the administrator side.
The School Corporation could not provide contracts for 3 of 13 employees tested, as the contracts
were not properly archived in the financial software used to electronically approve and archive employment
contracts. As such, we could not verify the employees were paid their contracted rate for hours spent
working on grant-related activities. This resulted in known questioned costs of $26,207.
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 200.334 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 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
INDIANA STATE BOARD OF ACCOUNTS
31
SOUTH BEND COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items. . . .
(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 (for IHE, this per
the IHE's definition of IBS); . . .
(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. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal control, and procedures should consist of actions that would
implement these policies.
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, not all employment contracts could be presented for audit nor could documentation
be provided to support time charged to the grant. Noncompliance with the provisions of federal
statutes, regulations, and the terms and conditions of the federal award could result in the loss of future
federal funding to the School Corporation.
Questioned Costs
There were known questioned costs of $26,207 as identified in the Condition and Context.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure contracts and certifications, as appropriate,
are retained to support the amounts paid from Education Stabilization Fund program funds.
INDIANA STATE BOARD OF ACCOUNTS
32
SOUTH BEND COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Auditor's Response
The alternative documentation provided was a snapshot from the administrator side of the financial
software system; however, the original source document, which was the contract that was approved by the
employee, the Superintendent of Schools, and the President of the School Board, was not provided to
substantiate the amounts in the administrator side of the financial software system. We reaffirm our finding
and will review the status of the finding during our next audit.