FINDING 2023-004
Subject: Special Education Cluster (IDEA) - Activities Allowed
or Unallowed, Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, Special Education Preschool Grants
Assistance Listings Numbers: 84.027, 84.173
Federal Award Numbers and Years (or Other Identifying Numbers): 19611-158-PN01, 19619-158-PN01,
20611-158-PN01, 20619-158-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation was a member of the Clark County Joint Services Program (Cooperative).
During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the
federal money on behalf of all its member school corporations. As the grant agreements were between the
Indiana Department of Education (IDOE) and each member school corporation, the School Corporation
was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate
oversight performed by the School Corporation to ensure compliance with the Activities Allowed or
Unallowed and the Allowable Costs/Cost Principles compliance requirements.
The Cooperative did not have internal controls in place over payroll transactions to ensure expenditures
were allowed and in conformance with the cost principles. The Treasurer reviewed a report which
showed the total amount paid from each fund and account; however, a detailed payroll report was not
reviewed which would have identified the employee being paid from the grant fund.
For vendor disbursements, although the Deputy Treasurer matched the invoice to the purchase
order and provided it to the Corporation Treasurer for review and signature of the Accounts Payable
Voucher (claim) prior to payment, the internal control was not effective and did not detect or allow correction
of errors. In the initial sample of 6 vendor disbursements, one claim was unable to be provided. As the
error was isolated to vendor disbursements, the sample of vendor disbursements only was increased by
31. Within the new sample of 31 vendor disbursements, an additional claim was unable to be provided. As
both vendor disbursements with missing documentation were travel expense reimbursements made to the
same employee, the ledger was reviewed for additional travel disbursements to that individual. None were
identified; thus, no further testing was determined to be necessary.
INDIANA STATE BOARD OF ACCOUNTS 20
SILVER CREEK SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The lack of internal controls over payroll disbursements was isolated to 2021-2022. The ineffective
internal controls and noncompliance over vendor disbursements were isolated to the two travel claims 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. . . ."
34 CFR 300.202(a) states:
"General. Amounts provided to the LEA under Part B of the Act -
(1) Must be expended in accordance with the applicable provisions of this part;
(2) Must be used only to pay the excess costs of providing special education and related
services to children with disabilities, consistent with paragraph (b) of this section; and
(3) Must be used to supplement State, local, and other Federal funds and not to supplant
those funds."
34 CFR 300.208 states:
"(a) Uses. Notwithstanding §§ 300.202, 300.203(b), and 300.162(b), funds provided to an
LEA under Part B of the Act may be used for the following activities:
(1) Services and aids that also benefit nondisabled children. For the costs of special
education and related services, and supplementary aids and services, provided in a
regular class or other education-related setting to a child with a disability in accordance
with the IEP of the child, even if one or more nondisabled children benefit from these
services.
(2) Early intervening services. To develop and implement coordinated, early intervening
educational services in accordance with § 300.226.
INDIANA STATE BOARD OF ACCOUNTS 21
SILVER CREEK SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(3) High cost special education and related services. To establish and implement cost or
risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in
a consortium of which the LEA is a part, to pay for high cost special education and
related services.
(b) Administrative case management. An LEA may use funds received under Part B of the
Act to purchase appropriate technology for recordkeeping, data collection, and related case
management activities of teachers and related services personnel providing services described
in the IEP of children with disabilities, that is needed for the implementation of those case
management activities."
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. . . ."
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 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, appropriate documentation for two travel claims was not retained.
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 that documentation will be maintained and
made available for audit.
INDIANA STATE BOARD OF ACCOUNTS
22
SILVER CREEK SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.