FINDING 2023-003
Information on the federal program:
Subject: Education Stabilization Fund – Advance Draws
Federal Agency: Department of Education
Federal Program: COVID-19 – Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers: S425D200013, S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs- Cost Principles
Audit Finding: Material Weakness, Qualified Opinion
Criteria: 2 CFR section 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 section 200.305 states in part:
(b) For non-Federal entities other than states, payments methods must minimize the time elapsing between
the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by
the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption
of checks, warrants, or payment by other means.
(1) The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness
to maintain both written procedures that minimize the time elapsing between the transfer of funds and
disbursement by the non-Federal entity, and financial management systems that meet the standards for
fund control and accountability as established in this part. Advance payments to a non-Federal entity must
be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate
cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project.
The timing and amount of advance payments must be as close as is administratively feasible to the actual
disbursements by the non-Federal entity for direct program or project costs and the proportionate share of
any allowable indirect costs. The non-Federal entity must make timely payment to contractors in
accordance with the contract provisions.
Condition: The School Corporation requested reimbursement prior to incurring expenditures under federal
grant awards. 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 Activities Allowed or
Unallowed, Allowable Costs- Cost Principles 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. 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. Requesting advance payments
prior to incurring allowable costs could result in disallowed costs or an interest obligation owed to the federal
government.
Questioned Costs: $37,987 of known questioned costs has been identified. This represents the amount
of advance payment received and not yet spent at June 30, 2023.
Context: During testing disbursements charged to ESF grants, we noted advance payments were received
during the audit period prior to allowable costs being incurred by the School Corporation impacting the
following Education Stabilization Fund grant awards:
The School Corporation submitted a claim for reimbursement for $43,864 from the ESSER I grant
award (84.425D) which was receipted on August 24, 2021. As of August 24, 2021, the School
Corporation had incurred $41,674 of grant expenditures. The remaining $2,190 was disbursed on
April 12, 2022.
The School Corporation submitted a claim for reimbursement for $148,822 from the ESSER II grant
award (84.425D) which was receipted on July 28, 2021. There were no expenditures incurred as
of the date of the reimbursement request. The School Corporation began incurring expenditures
after the advance payment, however, as of June 30, 2022, the School Corporation had an unspent
cash balance of $24,613 in the ESSER II fund because of the advance payment. The School
Corporation did not request any reimbursements for the period of July 1, 2022 through June 30,
2023 and continued to incur expenditures. As of June 30, 2023, the School Corporation had an
u nspent cash balance of $16,145.
The School Corporation submitted two claims for reimbursements from the ESSER III grant award
(84.425U) during fiscal year 2022. The first claim reimbursement was receipted on November 24,
2021, in the amount of $52,210. The second claim reimbursement request was receipted on June
22, 2022, in the amount of $144,649. The School Corporation had incurred expenditures as of the
date of each claim reimbursement requests, however, the amount claimed for reimbursement
exceeded expenditures incurred resulting in advance payments being received. As of June 30,
2022, the School Corporation had an unspent cash balance of $88,348 in the ESSER III fund as a
result of the advance payment. The School Corporation did not request any claims for
reimbursements for the period of July 1, 2022 through June 30, 2023 and continued to incur
expenditures. As of June 30, 2023, the School Corporation had an unspent cash balance of
$21,842 in the ESSER III fund because of the advance payments.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommended the School Corporation review the internal controls surrounding the
reimbursement request process and ensure claims for reimbursements are supported by costs incurred
prior to the submission of the request for reimbursement. For any requests for advance payments, the
School Corporation should seek pre-approval from the the Indiana Department of Education prior to making
any requests for advance payments and implement controls to minimize the time between drawing and
disbursing federal funds.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.