FINDING 2023-005
Subject: Title I Grants to Local Educational Agencies - Reporting
Federal Agency: Department of Education
Federal Program: Title I Grants to Local Educational Agencies
Assistance Listings Number: 84.010
Federal Award Numbers and Years (or Other Identifying Numbers): S010A190014, S010A200014,
S010A210014, S010A220014
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Modified Opinion
INDIANA STATE BOARD OF ACCOUNTS
28
SCHOOL CITY OF EAST CHICAGO
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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 to ensure that reimbursement requests or final expenditure reports
were properly supported.
Reimbursement Requests
A sample of five reimbursement requests were selected for testing. Of the five reimbursement
requests tested, one reimbursement request was determined to be a duplicate of a previous
reimbursement request. This resulted in the School Corporation being over reimbursed
$268,855. On February 7, 2023, the School Corporation returned $7,027 of the amount
reimbursed twice to the Indiana Department of Education (IDOE); however, the School
Corporation failed to return the remaining $261,828, which is considered questioned costs.
Due to the error noted above, an additional six reimbursement requests were selected for
testing. No errors were identified with the additional reimbursement requests.
Final Expenditure Reports
Two final expenditure reports were due during the audit period. Both reports were selected for
testing. For one of the two final expenditure reports submitted, the School Corporation did not
report the parental involvement and nonpublic set asides, which should have been reported
based on the Title I Application for FY2021.
The lack of internal controls and noncompliance were isolated to the one reimbursement request
and one final expenditure report identified 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. . . ."
INDIANA STATE BOARD OF ACCOUNTS
29
SCHOOL CITY OF EAST CHICAGO
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200.302(b) states in part:
"The financial management system of each non-Federal entity must provide for the following
. . .
(2) Accurate, current, and complete disclosure of the financial results of each Federal
award or program in accordance with the reporting requirements set forth in §§ 200.328
and 200.329. . . .
(3) Records that identify adequately the source and application of funds for federallyfunded
activities. These records must contain information pertaining to Federal
awards, authorizations, obligations, unobligated balances, assets, expenditures,
income and interest and be supported by source documentation. . . ."
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 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, there was one reimbursement request in which the School Corporation was
over reimbursed and one final expenditure that was not reported accurately.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of future federal funds to the School Corporation.
Questioned Costs
Known questioned costs of $261,828 were identified as noted in the Condition and Context.
Recommendation
We recommended that the School Corporation's management establish a proper system of internal
controls and develop policies and procedures to ensure expenditures are only requested once for
reimbursement, that overpayments are promptly returned to the IDOE, and that reports include all required
information.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.