Finding Text
FINDING 2023-006
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: 84.425D
Federal Award Number and Year (or Other Identifying Number): S425D210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
The Education Stabilization Fund (ESF) established by the Coronavirus Aid, Relief, and Economic
Security (CARES) Act, and further funded by the Coronavirus Response and Relief Supplemental
Appropriations Act (CRSSA) and the American Rescue Plan (ARP) Act, was for the purpose of preventing,
preparing for, or responding to the novel coronavirus.
A sample of 26 claims charged to the ESF program for which reimbursement was received during
the audit period was selected for testing to verify the expenditures were in conformance with the applicable
cost principles. Of the 26 claims tested, 5 were transfers of payroll expenses, totaling $179,625, into the
Esser II fund (ESF fund) for Coronavirus related payroll expenses. Errors as described below were
identified when testing the transfers.
INDIANA STATE BOARD OF ACCOUNTS
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LAKELAND SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The School Corporation transferred employee's pay related to sick time due to COVID-19 from the
paying funds to the ESF fund. Several employees' pay was not able to be recalculated. The School
Corporation provided documentation supporting the employees' pay; however, the recalculation of that pay
did not equal the amount transferred into the ESF Fund. The total calculated variances were $8,300. This
amount was considered questioned costs.
In addition, several employees' pay did not have appropriate supporting documentation to
substantiate payment of their payroll with ESF funds. This included the payment of substitute teachers
without documentation of the person paid and the payment of sick days when the school was closed. Total
payroll that was not substantiated was $24,769. This amount was considered questioned costs.
The ineffective internal controls were a systemic issue throughout the audit period. The noncompliance
was isolated to the items 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 200.334 states in part:
"Financial records, supporting documents, statistical records, and all other non-Federal entity
records pertinent to a Federal award must be retained for a period of three years from the date
of submission of the final expenditure report or, for Federal awards that are renewed quarterly
or annually, from the date of the submission of the quarterly or annual financial report,
respectively, as reported to the Federal awarding agency or pass-through entity in the case of
a subrecipient. . . ."
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:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items. . . .
(g) Be adequately documented. . . ."
INDIANA STATE BOARD OF ACCOUNTS
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LAKELAND SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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 control, 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, documentation could not be provided to support amounts charged to the grant.
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 $33,069 were identified as detailed in 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 amounts charged to the grant are properly
recorded and approved to support the amounts paid from the COVID-19 - Education Stabilization Fund
program.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
INDIANA STATE BOARD OF ACCOUNTS
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