Finding Text
FINDING 2023-002
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: 84.425U
Federal Award Number and Year (or Other Identifying Number): S425U210013
Pass-Through Entity: Central Indiana Educational Service Center
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation was the subrecipient of an Explore, Engage, Experience (3E) Grant from
the Central Indiana Educational Service Center (CIESC). Per the award letter received from the CIESC,
the School Corporation was allocated $200,000 to hire a district coordinator for 3E initiatives.
As only one reimbursement covering the period of August 1, 2022 to September 30, 2022, was
requested from the CIESC for the 3E grant, all expenditures associated with the grant were selected for
testing to verify the expenditures were in conformance with the applicable cost principles. Expenditures
totaling $41,193, were for the salary of the grant lead and a secondary salary. No time and effort
documentation was maintained to support the salary amounts charged to the program. As a result, these
expenditures were determined not to be in conformance with the applicable cost principles and were
considered questioned costs.
The lack of internal controls and noncompliance were isolated to the 3E Grant expenditures noted
above.
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 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards: . . .
(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 . . .
(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 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, costs were not adequately supported by personnel 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
Known questioned costs of $41,193 were identified, as detailed 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 costs adequately documented.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.