Audit 382422

2025-002 U.S. Department of Agriculture Pass-Through Iowa Department of Education Child Nutrition Cluster Programs: 10.553 School Breakfast Program 10.555 National School Lunch Program 10.555 Commodities -DOD (Noncash) 10.555 Commodities (Noncash) 10.559 Summer Food Service Program for Children Federal Award Year: 2025 Finding: The District overcharged indirect costs to the Child Nutrition Cluster program. Criteria: The 2 Code of Federal Regulation (CFR) Part 200, Subpart E provides guidance on the provisions of indirect costs. Indirect cost rates are applied to modified total direct costs (MTDC). 2 CFR 200 defines MTDC as: All direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs. Condition: The District applied the indirect cost rate to an estimated total direct revenue base that was not final for the fiscal year. In addition, the District did not net unallowable costs identified in a state review as communicated as part of review close out procedures. Cause: The District prepared a calculation using an estimate based on revenue received before year end in order to have a transfer amount approved by the Board prior to year-end. The District did not include the adjustment required by the state review finding. Effect: The District could overcharge federal awards for indirect costs. Questioned costs: The District overcharged the program approximately $22,400 computed by applying the unrestricted indirect cost rate provided by the Iowa Department of Education to federal revenues less the overcharges identified in the state audit. Context: The overcharge represents approximately 1.2 percent of the program revenue base and approximately 0.5 percent of the total program expenditures on the Schedule of Expenditures of Federal Awards. Identification as a repeat finding: This is not a repeat finding. Recommendation: We recommend the District annually prepare the indirect cost worksheet based on the actual fiscal year trial balance to compute the base for all federal awards to apply indirect cost rates. The Iowa Department of Education has a worksheet tool to ensure the proper MTDC is used. The MTDC is based on either revenue or expenses whichever is lower. Any adjustments from state review or other trial balance adjustments should be included in the District process for annual computation.