Finding Text
FINDING 2023-003
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Indiana Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013,
S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material weakness, Modified Opinion
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include segregation of duties, that would likely be effective in preventing, or detecting and
correcting, noncompliance. The School Corporation was required to submit an annual data report to the
Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but
was not limited to, current period expenditures, prior period expenditures, and expenditures per activity.
During the audit period the School Corporation submitted two ESSER I reports, two ESSERI II
reports, and two ESSER III reports for a total of six reports. The reports were prepared and submitted by
the Finance Manager without a documented oversight or review process.
In addition, four of the six annual data reports were not supported by the School Corporation's
records. The financial information provided did not agree to the data submitted; therefore, we could not
determine the accuracy of the annual data reports.
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). . . ."
INDIANA STATE BOARD OF ACCOUNTS
17
NORTHWESTERN SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200.302(b) 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."
34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with
program requirements."
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 controls, 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, reports were not supported by the School Corporation's records.
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 no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure that the records of the School Corporation
support the expenditures reported on the reports submitted on behalf of the COVID-19 - Education
Stabilization Fund.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.