Subject: Child Nutrition Cluster – Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
AL Numbers: 10.533, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award.
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the allowable costs/cost principles compliance requirements.
Cause: After June 30, 2024, the School Corporation changed systems used to track time worked for the food service department and is unable to obtain archived records or time sheets to support the hours worked
by the food service department personnel. A system of internal controls was not in place to ensure there were appropriate records or audit trails to support time charged to the federal program.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were $19,714 of questioned costs identified.
Context: During the testing of internal controls over allowable costs/cost principles, the School Corporation had a system conversion for time entry during the audit period and did not retain copies of the adequate documentation to corroborate the hours worked for food service employees tested. The School Corporation was unable to provide timesheets or records supporting the number of hours charged by each employee for 35 of 35 selections related to hourly employees.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommend that the School Corporation's management establish an internal control process to ensure that detailed records are maintained and an audit trail is evident to comply with federal compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Subject: Child Nutrition Cluster – Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
AL Numbers: 10.533, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award.
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the allowable costs/cost principles compliance requirements.
Cause: After June 30, 2024, the School Corporation changed systems used to track time worked for the food service department and is unable to obtain archived records or time sheets to support the hours worked
by the food service department personnel. A system of internal controls was not in place to ensure there were appropriate records or audit trails to support time charged to the federal program.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were $19,714 of questioned costs identified.
Context: During the testing of internal controls over allowable costs/cost principles, the School Corporation had a system conversion for time entry during the audit period and did not retain copies of the adequate documentation to corroborate the hours worked for food service employees tested. The School Corporation was unable to provide timesheets or records supporting the number of hours charged by each employee for 35 of 35 selections related to hourly employees.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommend that the School Corporation's management establish an internal control process to ensure that detailed records are maintained and an audit trail is evident to comply with federal compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Subject: Child Nutrition Cluster – Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
AL Numbers: 10.533, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award.
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the allowable costs/cost principles compliance requirements.
Cause: After June 30, 2024, the School Corporation changed systems used to track time worked for the food service department and is unable to obtain archived records or time sheets to support the hours worked
by the food service department personnel. A system of internal controls was not in place to ensure there were appropriate records or audit trails to support time charged to the federal program.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were $19,714 of questioned costs identified.
Context: During the testing of internal controls over allowable costs/cost principles, the School Corporation had a system conversion for time entry during the audit period and did not retain copies of the adequate documentation to corroborate the hours worked for food service employees tested. The School Corporation was unable to provide timesheets or records supporting the number of hours charged by each employee for 35 of 35 selections related to hourly employees.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommend that the School Corporation's management establish an internal control process to ensure that detailed records are maintained and an audit trail is evident to comply with federal compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Subject: Child Nutrition Cluster – Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
AL Numbers: 10.533, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award.
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the allowable costs/cost principles compliance requirements.
Cause: After June 30, 2024, the School Corporation changed systems used to track time worked for the food service department and is unable to obtain archived records or time sheets to support the hours worked
by the food service department personnel. A system of internal controls was not in place to ensure there were appropriate records or audit trails to support time charged to the federal program.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were $19,714 of questioned costs identified.
Context: During the testing of internal controls over allowable costs/cost principles, the School Corporation had a system conversion for time entry during the audit period and did not retain copies of the adequate documentation to corroborate the hours worked for food service employees tested. The School Corporation was unable to provide timesheets or records supporting the number of hours charged by each employee for 35 of 35 selections related to hourly employees.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommend that the School Corporation's management establish an internal control process to ensure that detailed records are maintained and an audit trail is evident to comply with federal compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program:
Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). . . ."
29 CFR 5.5 states in part:
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project),
will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the
Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics…
(3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency).
2 CFR 200 Appendix II states in part:
In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . .
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirements.
Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation had one project for HVAC installation and improvements at various buildings which was funded with American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) (84.425U) grant awards. The School Corporation properly included Davis-Bacon wage rate requirements in the vendor contract, however, the School Corporation did not obtain the weekly payroll report certifications from the construction vendor to monitor compliance with the Davis-Bacon wage rate requirements. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation implement a formal process to ensure the required weekly payroll reports certifications are collected and reviewed for projects requiring labor installation and funded by federal grants subject to Davis-Bacon wage rate requirements to ensure compliance with federal regulations.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Subject: Child Nutrition Cluster – Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
AL Numbers: 10.533, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award.
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the allowable costs/cost principles compliance requirements.
Cause: After June 30, 2024, the School Corporation changed systems used to track time worked for the food service department and is unable to obtain archived records or time sheets to support the hours worked
by the food service department personnel. A system of internal controls was not in place to ensure there were appropriate records or audit trails to support time charged to the federal program.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were $19,714 of questioned costs identified.
Context: During the testing of internal controls over allowable costs/cost principles, the School Corporation had a system conversion for time entry during the audit period and did not retain copies of the adequate documentation to corroborate the hours worked for food service employees tested. The School Corporation was unable to provide timesheets or records supporting the number of hours charged by each employee for 35 of 35 selections related to hourly employees.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommend that the School Corporation's management establish an internal control process to ensure that detailed records are maintained and an audit trail is evident to comply with federal compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Subject: Child Nutrition Cluster – Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
AL Numbers: 10.533, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award.
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the allowable costs/cost principles compliance requirements.
Cause: After June 30, 2024, the School Corporation changed systems used to track time worked for the food service department and is unable to obtain archived records or time sheets to support the hours worked
by the food service department personnel. A system of internal controls was not in place to ensure there were appropriate records or audit trails to support time charged to the federal program.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were $19,714 of questioned costs identified.
Context: During the testing of internal controls over allowable costs/cost principles, the School Corporation had a system conversion for time entry during the audit period and did not retain copies of the adequate documentation to corroborate the hours worked for food service employees tested. The School Corporation was unable to provide timesheets or records supporting the number of hours charged by each employee for 35 of 35 selections related to hourly employees.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommend that the School Corporation's management establish an internal control process to ensure that detailed records are maintained and an audit trail is evident to comply with federal compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Subject: Child Nutrition Cluster – Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
AL Numbers: 10.533, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award.
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the allowable costs/cost principles compliance requirements.
Cause: After June 30, 2024, the School Corporation changed systems used to track time worked for the food service department and is unable to obtain archived records or time sheets to support the hours worked
by the food service department personnel. A system of internal controls was not in place to ensure there were appropriate records or audit trails to support time charged to the federal program.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were $19,714 of questioned costs identified.
Context: During the testing of internal controls over allowable costs/cost principles, the School Corporation had a system conversion for time entry during the audit period and did not retain copies of the adequate documentation to corroborate the hours worked for food service employees tested. The School Corporation was unable to provide timesheets or records supporting the number of hours charged by each employee for 35 of 35 selections related to hourly employees.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommend that the School Corporation's management establish an internal control process to ensure that detailed records are maintained and an audit trail is evident to comply with federal compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Subject: Child Nutrition Cluster – Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
AL Numbers: 10.533, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award.
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the allowable costs/cost principles compliance requirements.
Cause: After June 30, 2024, the School Corporation changed systems used to track time worked for the food service department and is unable to obtain archived records or time sheets to support the hours worked
by the food service department personnel. A system of internal controls was not in place to ensure there were appropriate records or audit trails to support time charged to the federal program.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were $19,714 of questioned costs identified.
Context: During the testing of internal controls over allowable costs/cost principles, the School Corporation had a system conversion for time entry during the audit period and did not retain copies of the adequate documentation to corroborate the hours worked for food service employees tested. The School Corporation was unable to provide timesheets or records supporting the number of hours charged by each employee for 35 of 35 selections related to hourly employees.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommend that the School Corporation's management establish an internal control process to ensure that detailed records are maintained and an audit trail is evident to comply with federal compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program:
Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). . . ."
29 CFR 5.5 states in part:
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project),
will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the
Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics…
(3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency).
2 CFR 200 Appendix II states in part:
In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . .
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirements.
Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation had one project for HVAC installation and improvements at various buildings which was funded with American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) (84.425U) grant awards. The School Corporation properly included Davis-Bacon wage rate requirements in the vendor contract, however, the School Corporation did not obtain the weekly payroll report certifications from the construction vendor to monitor compliance with the Davis-Bacon wage rate requirements. Therefore, no review was performed to ensure that pay rates complied with the federal wage rate requirements.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation implement a formal process to ensure the required weekly payroll reports certifications are collected and reviewed for projects requiring labor installation and funded by federal grants subject to Davis-Bacon wage rate requirements to ensure compliance with federal regulations.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.