Finding Text
FINDING 2023-002
Information on the federal program:
Subject: Education Stabilization Fund (ESSER) – Internal Controls
Federal Agency: Department of Education
Federal Program: COVID-19 – Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U, 84.425W
Federal Award Numbers and Years (Or Other Identifying Numbers): S425D200013, S425U210013,
S425W210015
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Finding: Material Weakness
Criteria: 2 CFR section 200.313 states in part:
(a) Title. Subject to the requirements and conditions set forth in this section, title to equipment acquired
under a Federal award will vest upon acquisition in the non-Federal entity. Unless a statute specifically
authorizes the Federal agency to vest title in the non-Federal entity without further responsibility to the
Federal Government, and the Federal agency elects to do so, the title must be a conditional title. Title must
vest in the non-Federal entity subject to the following conditions:
(1) Use the equipment for the authorized purposes of the project during the period of performance,
or until the property is no longer needed for the purposes of the project.
(2) Not encumber the property without approval of the Federal awarding agency or pass-through
entity.
(3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section.
(d) Management requirements. Procedures for managing equipment (including replacement equipment),
whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum,
meet the following requirements:
(1) Property records must be maintained that include a description of the property, a serial number
or other identification number, the source of funding for the property (including the FAIN), who holds
title, the acquisition date, and cost of the property, percentage of Federal participation in the project
costs for the Federal award under which the property was acquired, the location, use and condition
of the property, and any ultimate disposition data including the date of disposal and sale price of
the property.
(2) A physical inventory of the property must be taken and the results reconciled with the property
records at least once every two years.
(3) A control system must be developed to ensure adequate safeguards to prevent loss, damage,
or theft of the property. Any loss, damage, or theft must be investigated.
(4) Adequate maintenance procedures must be developed to keep the property in good condition.
(5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures
must be established to ensure the highest possible return. FINDING 2023-002 (Continued)
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 the Equipment and Real Property
Management compliance requirements.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the compliance requirements listed above.
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. Noncompliance with the grant
agreement and the Equipment and Real Property Management compliance requirement could result in the
loss of future federal funds to the School Corporation.
Questioned Costs: $5,163 (known questioned costs).
Context: There were three equipment purchases made during the audit period and charged to the ESF
grants which totaled $28,289 in the aggregate. During testing of equipment purchases, the following items
were noted:
For one of three equipment purchases selected for testing, we noted an equipment purchase for
computer hardware totaling $9,711 was not properly added to the School Corporation’s capital
asset ledger at June 30, 2023. The equipment purchase was charged to the ESSER III grant award
(84.425U).
For one of three equipment purchases selected for testing, we noted the equipment purchase was
not pre-approved by the Indiana Department of Education (IDOE) within the approved grant
application. The equipment purchase was for a middle school gym LED scoreboard in the amount
of $5,163 and was recorded under the general supplies - instruction expenditure account for the
ESSER II grant award (84.425D). Purchases for equipment exceeding $5,000 require preapproved
by the Indiana Department of Education (IDOE).
Identification as a repeat finding, if applicable: No.
Recommendation: We recommended that the School Corporation's management establish a system of
controls to ensure all equipment expenditures under federal grants obtain proper pre-approval (as
applicable) and are properly included on the School Corporation’s capital asset ledger.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.