FINDING 2023-007
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): S425D200013, S425D210013,
S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Equipment and Real Property Management
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The COVID-19 - Education Stabilization Funds (ESF) may be used to purchase equipment. Capital
expenditures for general and special purpose equipment purchases are subject to prior approval by the
Department of Education (ED) or the pass-through entity. In addition, with prior approval by the ED or the
pass-through entity, recipients and subrecipients may use the ESF funds to purchase real property and
perform construction or minor remodeling, and for improvements to land, buildings, or equipment that meet
the overall purpose of the ESF program, which is "to prevent, prepare for, and respond to" the COVID-19
pandemic.
A property record or capital asset listing, which would include 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)), who holds title, the acquisition date, cost of the property, percentage of
federal participation in the project costs for the federal award under which the property was acquired, the
location, and use and condition of the property is to be maintained for assets purchased that exceed the
School Corporation's capitalization threshold.
The School Corporation purchased two servers and completed an HVAC project using Education
Stabilization Funds; however, those items were not included on property records that included all the
required information. The missing information included a description of the property, source of funding,
percentage of federal participation in the project costs, location, and use and condition of the property. In
addition, a physical inventory was not completed after the equipment was purchased, nor were any
procedures in place to ensure the proper safeguarding and maintenance of the equipment purchased.
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). . . ."
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.
(3) A control system must be developed to ensure adequate safeguards to prevent loss,
damage, or theft of the property. Any loss, damage, or theft must be investigated.
(4) Adequate maintenance procedures must be developed to keep the property in good
condition. . . ."
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, property records were not maintained, physical inventories were not conducted,
and safeguarding and maintenance of equipment purchased with the Education Stabilization Funds
was not conducted.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of future federal funds 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 asset records include all necessary information
and are added individually, inventories and safeguarding and maintenance of equipment purchased
is conducted.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.