Finding Text
FINDING 2023-003
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, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation has a property inventory policy which outlines that a property record or
capital asset listing is to be maintained for items purchased with federal grant awards that exceed $5,000.
The property record or capital asset listing per the School Corporation's policy is to include the following: 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)), title entity, acquisition date, cost of the
property, percentage of Federal participation in the project costs for the award under which the equipment
was acquired, the location, use and condition of the equipment, and ultimate disposition data including the
date of the disposal and sales price of the equipment. The property record or asset listing is to be
maintained for assets that exceed the School Corporation's capitalization threshold. In addition, the policy
states a physical inventory of the property must be taken at least once every two years.
Equipment, totaling $720,578, was purchased with the grant award. All equipment purchased was
properly included on the capital asset listing; however, the capital asset listing did not include all the required
information. The capital asset listing was missing the following information: a serial number or other
identification number, the source of funding for the property (including the federal award identification
number (FAIN)), title entity, percentage of Federal participation in the project costs for the award under
which the equipment was acquired, and use of equipment. In addition, an inventory had not been completed
once 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). . . ."
INDIANA STATE BOARD OF ACCOUNTS
21
SALEM COMMUNITY SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200.313(d) states in part:
". . .
(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. . . ."
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, the School Corporation's asset listing did not include all the required information.
In addition, a physical inventory was not conducted every two years.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management establish a proper system of internal
controls and develop procedures to ensure asset records include all the necessary information and that a
physical inventory is conducted every two years as required.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.