Finding Text
FINDING 2023-005
Information on the federal program:
Subject: Special Education Cluster (IDEA) – Internal Controls
Federal Agency: Department of Education
Federal Program: Special Education Grants to States
Assistance Listings Number: 84.027
Federal Award Numbers and Years (or Other Identifying Numbers): 21611-046-PN01, 21619-046-PN01,
22619-046-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Procurement and Suspension and Debarment
Audit Findings: Material Weakness
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 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must verify that
the person with whom you intend to do business is not excluded or disqualified. You do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Condition: 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 suspension and debarment
compliance requirement.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the suspension and debarment requirements.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of
noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties
within an internal control system could have also allowed noncompliance with the compliance requirements
and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight,
reviews, and approvals over the activities of the programs.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation is a member of the Porter County Education Interlocal (Cooperative).
During fiscal year 2022-2023, the Cooperative operated the special education programs and spent the
federal money on behalf of all its members. As the grant agreements were between the Indiana Department
of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and
providing oversight of the Cooperative. However, there was inadequate oversight performed by the School
Corporation in order to ensure compliance with the Procurement and Suspension and Debarment
compliance requirement.
The School Corporation did not have internal controls in place to ensure that the Cooperative complied with
the suspension and debarment requirements. The Cooperative did not have effective internal controls to
ensure compliance with the suspension and debarment requirements.
Prior to entering into covered transactions with grant award funds, entities are required to verify that vendors
under covered transactions are not suspended, debarred, or otherwise excluded. "Covered transactions"
include, but are not limited to contracts for goods or services awarded under procurement and nonprocurement
transactions (i.e., grant agreement) that are expected to equal or exceed $25,000. The
verification is to be done by checking the System for Award Management (SAM) exclusions, collecting a
certification from that person, or adding a clause or condition to the covered transaction with that person.
Upon inquiry of the Cooperative in order to review procedures in place for verifying that an entity with which
it plans to enter into a covered transaction is not suspended, debarred or otherwise excluded, the
Cooperative explained that if the covered transaction had a contract, the contract was verified to make sure
the clause for suspension and debarment was included. However, if the covered transaction did not involve
a contract, the Cooperative did not have procedures in place to verify the suspension and debarment
requirements. A population of five covered transactions for goods or services that equaled or exceeded
$25,000 paid from grant award funds during the audit period was identified. Three of the five covered
transactions did not have documentation to show that they were verified for the suspension and debarment
requirements.
The lack of internal controls was isolated to the 22611-046-PN01 and 23611-046-PN01 grant awards in
fiscal year 23.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommended that management of the School Corporation establish a proper
system of internal controls and develop policies and procedures to monitor the Cooperative and ensure
vendors are not suspended, debarred, or otherwise excluded prior to entering into any covered
transactions.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.