FINDING 2023-010
Subject: COVID-19 - Education Stabilization Fund - Reporting
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Number: 84.425D
Federal Award Number and Year (or Other Identifying Number): S425D210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Modified Opinion
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.
The School Corporation was required to submit an annual data report to the Indiana Department
of Education (IDOE). Data to be submitted included, but was not limited to, current period expenditures,
prior period expenditures, and expenditures per activity.
During the audit period, the School Corporation submitted a total of four reports: two ESSER I
reports, one ESSER II report, and one ESSER III report. The annual data reports were prepared and
submitted to the IDOE by the Chief Financial Officer without an oversight or review process to prevent, or
detect and correct, errors.
Due to the lack of controls the following errors occurred. The ESSER II, Year 2 report, which
covered the period of July 2021 to June 30, 2022, was not supported by the School Corporation's records.
$1,555,604 in Expenditures for personnel services - salaries was reported as $1,555,604; however, this
amount should have been split between Personnel Services - salaries of $1,062,376, and Personnel
Services - Benefits of $493,228 according to the School Corporation's records provided.
The lack of internal controls was a systemic issue throughout the audit period and noncompliance
was isolated to the ESSER II, Year 2 report.
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 200.302(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. . . ."
34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format
that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other
responsibilities under the program."
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, reports were not accurately submitted to the IDOE.
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, including policies and procedures, that would provide segregation of duties to ensure
reviews, approvals, and oversight are taking place to ensure reports are submitted accurately.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.