Finding Text
FINDING 2023-001
Subject: Special Education Cluster (IDEA) – Earmarking
Federal Agency: Department of Education
Federal Program: Special Education Preschool Grants
Assistance Listing Number: 84.173
Federal Award Number: 22619-043-PN01
Compliance Requirement: Matching, Level of Effort, Earmarking
Audit Findings: Significant Deficiency
Criteria: 2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards 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 200.208(b) states in part:
"The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as
needed . . ."
511 IAC 7-34-7(b) states:
"The public agency, in providing special education and related services to students in nonpublic schools
must expend at least an amount that is the same proportion of the public agency total subgrant under 20
U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their
parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of
the same age range."
Condition: The School Corporation did not have internal controls in place to ensure that the Cooperative
complied with the earmarking requirements. The Cooperative did not have adequate procedures in place
to ensure that the required level of expenditures for non-public school students with disabilities was met for
each member school. The Cooperative did not have effective internal controls to ensure non-public school
expenditures were appropriately identified and reported.
Cause: A proper system of internal control 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 control
system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation is a member of the Northwest Indiana Special Education Cooperative
(Cooperative). During fiscal year 2022-2023, the Cooperative operated the special education program and
spent the federal money on behalf of all its members. As the grant agreement was 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 Matching, Level of Effort, Earmarking
compliance requirement.
The Non-Public Proportionate Share expenditures for the 22619-043-PN01 grant award could not be
verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic
proportionate share expenditures were determined by applying a percentage to the non-public school
budgeted expenditures. As such, we were unable to identify if the minimum amount per the grant award
was expended and properly reported to IDOE as required.
The lack of internal controls was isolated to the 22619-043-PN01 grant award.
Identification as a repeat finding: This is a repeat finding from the immediately prior audit report
(B60693). The prior audit finding number was 2021-001.
Recommendation: We recommended that management of the School Corporation establish a proper
system of internal control and develop policies and procedures to ensure non-public proportionate share
funds are appropriately allocated to the member school based on expenses charged directly on behalf of
the member school. Supporting documentation for these expenses should be retained for audit.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan