Finding Text
FINDING 2023-003
Information on the federal program:
Subject: Special Education Cluster (IDEA) – Internal Controls
Federal Agency: Department of Education
Federal Program: Special Education Grants to States, Special Education Preschool Grants
Assistance Listings Numbers: 84.027, 84.173
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 Requirement: Earmarking
Audit Findings: Significant Deficiency
Criteria: 2 CFR section 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 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: 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 earmarking compliance
requirement.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the earmarking requirements. FINDING 2023-003 (Continued)
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 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 Earmarking compliance requirement.
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.
The Non-Public Proportionate Share expenditures for the 22619-046-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 21611-046-PN01, 21619-046-PN01, and 22619-046-PN01
grant awards.
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
non-public proportionate share funds are appropriately allocated to the member school based on
expenditures charged directly on behalf of the member school. Supporting documentation for these
expenditures 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.