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FINDING 2022-005Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost PrinciplesFederal Agency: Department of EducationFederal Program: COVID-19 - Education Stabilization FundAssistance Listings Numbers: 84.425D, 84.425UFederal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425U210013Pass-Through Entity: Indiana Department of EducationCompliance Requirement: Allowable Costs/Cost PrinciplesAudit Findings: Material Weakness, Modified OpinionCondition and ContextAn effective internal control system was not in place at the School Corporation in order to ensurecompliance with requirements related to the grant agreement and the Allowable Costs/Cost Principlescompliance requirement.The School Corporation did not have adequate internal controls in place to ensure that the reimbursementrequests included salaries for all contracted employees and adequate supporting documentationor personnel activity reports, such as time and effort logs or Semi-Annual Certifications. The SchoolCorporation paid salaries for all contracted employees without adequate supporting documentation orpersonnel activity reports, such as time and effort logs or Semi-Annual Certifications. The total amountpaid to contracted employees was $51,644. This amount was considered questioned costs.The lack of internal controls and noncompliance were systemic issues throughout the audit period.CriteriaCFR 200.303 states in part:"The non-Federal entity must:(a) Establish and maintain effective internal control over the Federal award that providesreasonable assurance that the non-Federal entity is managing the Federal award incompliance with Federal statutes, regulations, and the terms and conditions of the Federalaward. These internal controls should be in compliance with guidance in 'Standards forInternal Control in the Federal Government' issued by the Comptroller General of theUnited States or the 'Internal Control Integrated Framework', issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO). . . ."2 CFR 200.430(i) states in part:"Standards for Documentation of Personnel Expenses(1) Charges to Federal awards for salaries and wages must be based on records thataccurately reflect the work performed. These records must:(i) Be supported by a system of internal control which provides reasonableassurance that the charges are accurate, allowable, and properly allocated;(ii) Be incorporated into the official records of the non-Federal entity;(iii) Reasonably reflect the total activity for which the employee is compensated bythe non-Federal entity, not exceeding 100% of compensated activities . . .(vii) Support the distribution of the employee's salary or wages among specificactivities or cost objectives if the employee works on more than one Federal award; aFederal award and non-Federal award; an indirect cost activity and a direct costactivity; two or more indirect activities which are allocated using different allocationbases; or an unallowable activity and a direct or indirect cost activity. . . ."CauseManagement had not developed a system of internal controls that would have ensured compliancewith the Allowable Costs/Cost Principles compliance requirement.EffectThe failure to establish an effective internal control system enabled material noncompliance to goundetected. Noncompliance with the grant agreement and the Allowable Costs/Cost Principles compliancerequirement could have resulted in the loss of federal funds to the School Corporation.Questioned CostsQuestioned costs of $51,644 were identified, as described in the Condition and Context.RecommendationWe recommended that the School Corporation's management establish a system of internal controlsto ensure compliance and comply with the grant agreement and the Allowable Costs/Cost Principlescompliance requirement.Views of Responsible OfficialsFor the views of responsible officials, refer to the Corrective Action Plan that is part of this report.