FINDING 2023-002
Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Numbers: 84.425D, 84.42U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013,
S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance. A property record or capital asset listing which would include a
description of the property, a serial number or other identification number, the source of funding for the
property (including the federal award identification number (FAIN)), who holds title, the acquisition date,
cost of the property, percentage of federal participation in the project costs for the federal award under
which the property was acquired, the location, and use and condition of the property is to be maintained for
assets purchased that exceed the School Corporation's capitalization threshold.
INDIANA STATE BOARD OF ACCOUNTS
18
COMMUNITY SCHOOLS OF FRANKFORT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The School Corporation paid for equipment totaling $842,161 with its COVID-19 - Education
Stabilization Fund grant award; however, only equipment with a cost of $215,720 could be identified in the
asset listing provided.
In addition, the School Corporation capital asset records were incomplete and did not include all
the required information. The asset listing did not always include the 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.
Finally, the School Corporation did not complete a capital asset inventory every two years as
required.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
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 200.313(d) states in part:
"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. . . ."
INDIANA STATE BOARD OF ACCOUNTS 19
COMMUNITY SCHOOLS OF FRANKFORT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. 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 design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, asset records were incomplete, and a physical inventory was not taken.
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
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure asset records include all the necessary
information and an inventory is taken every two years.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.