Finding Text
FINDING 2023-007
Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed,
Allowable Costs/Cost Principles, Earmarking, Period of Performance
Federal Agency: Department of Education
Federal Programs: Special Education Grant to States, Special Education Preschool Grants
Assistance Listing Numbers: 84.027, 84.173
Federal Award Numbers and Years (or Other Identifying Numbers): 21611-168-PN01, 21619-168-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles;
Matching, Level of Effort, Earmarking; Period of Performance
Audit Finding: Material Weakness
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 with the Activities Allowed or Unallowed; the Allowable Costs/Cost
Principles; the Matching, Level of Effort, Earmarking; and the Period of Performance compliance requirements.
Activities Allowed or Unallowed and Allowable Costs/Cost Principles
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 related to activities allowed and
conformance with the cost principles. The School Corporation did not have adequate
procedures in place to ensure that only employees performing duties for the special education
program were being paid out of the grant funds. The Corporation Treasurer was reviewing a
total amount paid from each fund account; however, a detailed payroll report was not being
reviewed that would have identified the employees being paid from the grant fund.
INDIANA STATE BOARD OF ACCOUNTS
27
SILVER CREEK SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Matching, Level of Effort, Earmarking
The School Corporation did not have internal controls in place to ensure that proportionate
share expenses were properly spent. The Special Education Director and Treasurer compiled
and reviewed the proportionate share reports sent to the Indiana Department of Education
(IDOE) to track nonpublic school expenses; however, that internal control was not able to be
verified as the reports were not retained.
Period of Performance
The School Corporation had not properly designed or implemented a system of internal controls
to ensure transactions made from special education funds occurred within the appropriate
period of performance. Claims for the special education programs were paid without an
appropriate level of review or oversight to ensure the expenditures charged to each grant were
within the allowed time frame. Although the reimbursement requests submitted to the IDOE
were prepared by the Treasurer and approved by the Special Education Director, the School
Corporation was unable to provide tangible audit evidence of this review and approval process,
which may have included a review of the costs included on each request to verify they were
within the correct period of performance.
The lack of internal controls was isolated to 2022-2023.
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). . . ."
Cause
A proper system of internal controls was not implemented 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.
Questioned Costs
There were no questioned costs identified.
INDIANA STATE BOARD OF ACCOUNTS
28
SILVER CREEK SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place and are adequately documented.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.