2024-003 Controls over Payroll (Material Weakness in Internal Controls over Compliance and Material Noncompliance) Title: Research and Development Cluster Funding Agency, Federal Award, Agreement Number, Award Year, Assistance Listing Number: National Science Foundation, 2122108, 2024,47.049 National Science Foundation, 1953487, 2024,47.076 United States Department of Education, P031C160248, 2024, 84.031C United States Department of Health and Human Services, 1R16GM146669-01 & Q02067J, 2024, 93.859 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013, 23-DG-11030000-014 Award Year:2024 Assistance Listing Number:10.694 Title: Foster Care-Title IV-E Funding Agency: United States Department of Health and Human Services Federal Award Agreement Number:N/A Award Year:2024 Assistance Listing Number:93.658 Pass-Through Agency:CYFD Pass-Through Identification Number:23-690-500-25581 Condition: In testing 25 payroll items from each program listed above, CRI noted exceptions as described in the following table. No exceptions were noted in the items tested for the Foster Care program. (See table in report pg 120) Questioned Costs: Known and likely questioned costs of $4,547 and $506,209 are associated with the R&D Cluster related to discrepancies in time and effort documentation. No questioned costs were noted in the Southwest Forest Health and Wildfire Prevention Program or the Foster Care program. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity 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 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.430 – Compensation – personal services, paragraph (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: The University does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. The University has deficiencies recording and processing payroll as described in finding 2024-001. Effect: The University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency.
2024-005 (2022-005) Procurement, Small Purchase (Significant Deficiency in Internal Controls over Compliance with Questioned Costs Greater than $25,000) - Repeated Title: Research and Development Cluster Funding Agency: National Science Foundation Federal Award Agreement Number: 1914463, 1953487 Award Year: 2024 Assistance Listing Number: 47.076 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013 Award Year:2024 Assistance Listing Number:10.694 Condition: During our review of procurement testing in the Research and Development Cluster, the University did not follow small purchase procedures and did not have an annual self-certification election to follow micropurchase procurement for professional services. In our procurement testing in the Southwest Forest Health and Wildfire Prevention grant, no support was provided to test the procurement methods used for small purchases. Progress on resolution of prior year finding: No progress was made. Questioned Costs: Known and likely questioned costs of $78,063 and $30,975 in the R&D Cluster and the Southwest Forest Health and Wildfire Prevention program, respectively. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity 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 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 200.320(a) sets the micro-purchase threshold at $10,000 and requires purchases over the micro-purchase threshold to use small purchase procedures, whereby price or rate quotations must be obtained and 2 CFR 200.320(a)(1)(iv) states the recipient may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made available to the auditors which includes a justification, clear identification of the threshold, and supporting documentation. Per Title 2 US Code of Federal Regulations Part 200.403(g), costs must be adequately documented to be allowable under Federal awards. Cause: The University was using a $50,000 threshold for professional services to utilize micropurchase method of procurement in the Research and Development Cluster. In the Southwest Forest Health and Wildfire Prevention grant, the University was not retaining the supporting documentation to ensure purchase is allowable. Effect: The University may unintentionally use a higher-cost vendor when failing to obtain price or rate quotations for items over the micro-purchase threshold. In addition, the University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency
2024-003 Controls over Payroll (Material Weakness in Internal Controls over Compliance and Material Noncompliance) Title: Research and Development Cluster Funding Agency, Federal Award, Agreement Number, Award Year, Assistance Listing Number: National Science Foundation, 2122108, 2024,47.049 National Science Foundation, 1953487, 2024,47.076 United States Department of Education, P031C160248, 2024, 84.031C United States Department of Health and Human Services, 1R16GM146669-01 & Q02067J, 2024, 93.859 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013, 23-DG-11030000-014 Award Year:2024 Assistance Listing Number:10.694 Title: Foster Care-Title IV-E Funding Agency: United States Department of Health and Human Services Federal Award Agreement Number:N/A Award Year:2024 Assistance Listing Number:93.658 Pass-Through Agency:CYFD Pass-Through Identification Number:23-690-500-25581 Condition: In testing 25 payroll items from each program listed above, CRI noted exceptions as described in the following table. No exceptions were noted in the items tested for the Foster Care program. (See table in report pg 120) Questioned Costs: Known and likely questioned costs of $4,547 and $506,209 are associated with the R&D Cluster related to discrepancies in time and effort documentation. No questioned costs were noted in the Southwest Forest Health and Wildfire Prevention Program or the Foster Care program. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity 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 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.430 – Compensation – personal services, paragraph (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: The University does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. The University has deficiencies recording and processing payroll as described in finding 2024-001. Effect: The University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency.
2024-005 (2022-005) Procurement, Small Purchase (Significant Deficiency in Internal Controls over Compliance with Questioned Costs Greater than $25,000) - Repeated Title: Research and Development Cluster Funding Agency: National Science Foundation Federal Award Agreement Number: 1914463, 1953487 Award Year: 2024 Assistance Listing Number: 47.076 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013 Award Year:2024 Assistance Listing Number:10.694 Condition: During our review of procurement testing in the Research and Development Cluster, the University did not follow small purchase procedures and did not have an annual self-certification election to follow micropurchase procurement for professional services. In our procurement testing in the Southwest Forest Health and Wildfire Prevention grant, no support was provided to test the procurement methods used for small purchases. Progress on resolution of prior year finding: No progress was made. Questioned Costs: Known and likely questioned costs of $78,063 and $30,975 in the R&D Cluster and the Southwest Forest Health and Wildfire Prevention program, respectively. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity 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 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 200.320(a) sets the micro-purchase threshold at $10,000 and requires purchases over the micro-purchase threshold to use small purchase procedures, whereby price or rate quotations must be obtained and 2 CFR 200.320(a)(1)(iv) states the recipient may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made available to the auditors which includes a justification, clear identification of the threshold, and supporting documentation. Per Title 2 US Code of Federal Regulations Part 200.403(g), costs must be adequately documented to be allowable under Federal awards. Cause: The University was using a $50,000 threshold for professional services to utilize micropurchase method of procurement in the Research and Development Cluster. In the Southwest Forest Health and Wildfire Prevention grant, the University was not retaining the supporting documentation to ensure purchase is allowable. Effect: The University may unintentionally use a higher-cost vendor when failing to obtain price or rate quotations for items over the micro-purchase threshold. In addition, the University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency
2024-003 Controls over Payroll (Material Weakness in Internal Controls over Compliance and Material Noncompliance) Title: Research and Development Cluster Funding Agency, Federal Award, Agreement Number, Award Year, Assistance Listing Number: National Science Foundation, 2122108, 2024,47.049 National Science Foundation, 1953487, 2024,47.076 United States Department of Education, P031C160248, 2024, 84.031C United States Department of Health and Human Services, 1R16GM146669-01 & Q02067J, 2024, 93.859 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013, 23-DG-11030000-014 Award Year:2024 Assistance Listing Number:10.694 Title: Foster Care-Title IV-E Funding Agency: United States Department of Health and Human Services Federal Award Agreement Number:N/A Award Year:2024 Assistance Listing Number:93.658 Pass-Through Agency:CYFD Pass-Through Identification Number:23-690-500-25581 Condition: In testing 25 payroll items from each program listed above, CRI noted exceptions as described in the following table. No exceptions were noted in the items tested for the Foster Care program. (See table in report pg 120) Questioned Costs: Known and likely questioned costs of $4,547 and $506,209 are associated with the R&D Cluster related to discrepancies in time and effort documentation. No questioned costs were noted in the Southwest Forest Health and Wildfire Prevention Program or the Foster Care program. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity 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 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.430 – Compensation – personal services, paragraph (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: The University does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. The University has deficiencies recording and processing payroll as described in finding 2024-001. Effect: The University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency.
2024-005 (2022-005) Procurement, Small Purchase (Significant Deficiency in Internal Controls over Compliance with Questioned Costs Greater than $25,000) - Repeated Title: Research and Development Cluster Funding Agency: National Science Foundation Federal Award Agreement Number: 1914463, 1953487 Award Year: 2024 Assistance Listing Number: 47.076 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013 Award Year:2024 Assistance Listing Number:10.694 Condition: During our review of procurement testing in the Research and Development Cluster, the University did not follow small purchase procedures and did not have an annual self-certification election to follow micropurchase procurement for professional services. In our procurement testing in the Southwest Forest Health and Wildfire Prevention grant, no support was provided to test the procurement methods used for small purchases. Progress on resolution of prior year finding: No progress was made. Questioned Costs: Known and likely questioned costs of $78,063 and $30,975 in the R&D Cluster and the Southwest Forest Health and Wildfire Prevention program, respectively. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity 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 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 200.320(a) sets the micro-purchase threshold at $10,000 and requires purchases over the micro-purchase threshold to use small purchase procedures, whereby price or rate quotations must be obtained and 2 CFR 200.320(a)(1)(iv) states the recipient may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made available to the auditors which includes a justification, clear identification of the threshold, and supporting documentation. Per Title 2 US Code of Federal Regulations Part 200.403(g), costs must be adequately documented to be allowable under Federal awards. Cause: The University was using a $50,000 threshold for professional services to utilize micropurchase method of procurement in the Research and Development Cluster. In the Southwest Forest Health and Wildfire Prevention grant, the University was not retaining the supporting documentation to ensure purchase is allowable. Effect: The University may unintentionally use a higher-cost vendor when failing to obtain price or rate quotations for items over the micro-purchase threshold. In addition, the University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency
2024-003 Controls over Payroll (Material Weakness in Internal Controls over Compliance and Material Noncompliance) Title: Research and Development Cluster Funding Agency, Federal Award, Agreement Number, Award Year, Assistance Listing Number: National Science Foundation, 2122108, 2024,47.049 National Science Foundation, 1953487, 2024,47.076 United States Department of Education, P031C160248, 2024, 84.031C United States Department of Health and Human Services, 1R16GM146669-01 & Q02067J, 2024, 93.859 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013, 23-DG-11030000-014 Award Year:2024 Assistance Listing Number:10.694 Title: Foster Care-Title IV-E Funding Agency: United States Department of Health and Human Services Federal Award Agreement Number:N/A Award Year:2024 Assistance Listing Number:93.658 Pass-Through Agency:CYFD Pass-Through Identification Number:23-690-500-25581 Condition: In testing 25 payroll items from each program listed above, CRI noted exceptions as described in the following table. No exceptions were noted in the items tested for the Foster Care program. (See table in report pg 120) Questioned Costs: Known and likely questioned costs of $4,547 and $506,209 are associated with the R&D Cluster related to discrepancies in time and effort documentation. No questioned costs were noted in the Southwest Forest Health and Wildfire Prevention Program or the Foster Care program. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity 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 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.430 – Compensation – personal services, paragraph (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: The University does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. The University has deficiencies recording and processing payroll as described in finding 2024-001. Effect: The University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency.
2024-005 (2022-005) Procurement, Small Purchase (Significant Deficiency in Internal Controls over Compliance with Questioned Costs Greater than $25,000) - Repeated Title: Research and Development Cluster Funding Agency: National Science Foundation Federal Award Agreement Number: 1914463, 1953487 Award Year: 2024 Assistance Listing Number: 47.076 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013 Award Year:2024 Assistance Listing Number:10.694 Condition: During our review of procurement testing in the Research and Development Cluster, the University did not follow small purchase procedures and did not have an annual self-certification election to follow micropurchase procurement for professional services. In our procurement testing in the Southwest Forest Health and Wildfire Prevention grant, no support was provided to test the procurement methods used for small purchases. Progress on resolution of prior year finding: No progress was made. Questioned Costs: Known and likely questioned costs of $78,063 and $30,975 in the R&D Cluster and the Southwest Forest Health and Wildfire Prevention program, respectively. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity 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 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 200.320(a) sets the micro-purchase threshold at $10,000 and requires purchases over the micro-purchase threshold to use small purchase procedures, whereby price or rate quotations must be obtained and 2 CFR 200.320(a)(1)(iv) states the recipient may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made available to the auditors which includes a justification, clear identification of the threshold, and supporting documentation. Per Title 2 US Code of Federal Regulations Part 200.403(g), costs must be adequately documented to be allowable under Federal awards. Cause: The University was using a $50,000 threshold for professional services to utilize micropurchase method of procurement in the Research and Development Cluster. In the Southwest Forest Health and Wildfire Prevention grant, the University was not retaining the supporting documentation to ensure purchase is allowable. Effect: The University may unintentionally use a higher-cost vendor when failing to obtain price or rate quotations for items over the micro-purchase threshold. In addition, the University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency
2024-003 Controls over Payroll (Material Weakness in Internal Controls over Compliance and Material Noncompliance) Title: Research and Development Cluster Funding Agency, Federal Award, Agreement Number, Award Year, Assistance Listing Number: National Science Foundation, 2122108, 2024,47.049 National Science Foundation, 1953487, 2024,47.076 United States Department of Education, P031C160248, 2024, 84.031C United States Department of Health and Human Services, 1R16GM146669-01 & Q02067J, 2024, 93.859 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013, 23-DG-11030000-014 Award Year:2024 Assistance Listing Number:10.694 Title: Foster Care-Title IV-E Funding Agency: United States Department of Health and Human Services Federal Award Agreement Number:N/A Award Year:2024 Assistance Listing Number:93.658 Pass-Through Agency:CYFD Pass-Through Identification Number:23-690-500-25581 Condition: In testing 25 payroll items from each program listed above, CRI noted exceptions as described in the following table. No exceptions were noted in the items tested for the Foster Care program. (See table in report pg 120) Questioned Costs: Known and likely questioned costs of $4,547 and $506,209 are associated with the R&D Cluster related to discrepancies in time and effort documentation. No questioned costs were noted in the Southwest Forest Health and Wildfire Prevention Program or the Foster Care program. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity 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 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.430 – Compensation – personal services, paragraph (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: The University does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. The University has deficiencies recording and processing payroll as described in finding 2024-001. Effect: The University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. 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). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 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 that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance 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 by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. 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). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 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 that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance 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 by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. 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). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 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 that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance 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 by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. 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). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 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 that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance 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 by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. 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). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 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 that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance 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 by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. 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). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 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 that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance 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 by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
CONDITION The Department of Health and Human Services (DHHS) charged WIC special formula distribution center food outlay costs to the wrong Federal fiscal year. CRITERIA Federal regulation, 2 CFR 200.403(h), states, in part, in order to be allowable under Federal awards, costs must be incurred during the approved budget period. Federal regulation, 2 CFR 200.303, requires non-Federal entities, in part, to 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. CAUSE The Department of Health and Human Services does not have a procedure to ensure special formula distribution center food outlays are applied to the correct Federal fiscal year. EFFECT The WIC special formula distribution center food outlay costs charged to the wrong Federal fiscal year resulted in unallowable costs to the Federal fiscal year in which they were charged since the costs were outside of the period of performance for grant. This also impacted the accuracy of Federal fiscal year expenses reported to USDA Food and Nutrition Services. CONTEXT State agencies can only charge allowable costs for obligations incurred during the grant's period of performance. The WIC grant is available for one year, October 1 through September 30, and only obligations incurred during that period can be charged to the grant. The Department of Health and Human Services incurred costs in August 2022 for FFY 2022 for special formula distribution center food outlays that were paid in February 2023 and charged to FFY 2023. A random sample test identified a known error amount is $15,451 with likely projected questioned costs of $71,642. Twenty-six special formula distribution center payments were made during the audit period totaling $604,441. Aside from the projection and based on support provided by DHHS, eight special formula distribution center payments, in addition to the known error from sample testing, totaling $198,289, are likely charged to the incorrect Federal fiscal year. Where sampling was performed, the audit used a non-statistical sampling method. IDENTIFICATION AS A REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend the Department of Health and Human Services establish procedures to ensure WIC special formula distribution center food outlay costs are charged to the proper Federal fiscal year. We also recommend the Department of Health and Human Services work with U.S. Food and Nutrition Services to complete a post closeout adjustment to accurately reflect expenses within the correct Federal fiscal years. DEPARTMENT OF HEALTH AND HUMAN SERVICES RESPONSE The Department of Health and Human Services agrees with the recommendation. See “Management’s Response and Corrective Action” section of this report.
CONDITION The Department of Health and Human Services (DHHS) charged WIC special formula distribution center food outlay costs to the wrong Federal fiscal year. CRITERIA Federal regulation, 2 CFR 200.403(h), states, in part, in order to be allowable under Federal awards, costs must be incurred during the approved budget period. Federal regulation, 2 CFR 200.303, requires non-Federal entities, in part, to 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. CAUSE The Department of Health and Human Services does not have a procedure to ensure special formula distribution center food outlays are applied to the correct Federal fiscal year. EFFECT The WIC special formula distribution center food outlay costs charged to the wrong Federal fiscal year resulted in unallowable costs to the Federal fiscal year in which they were charged since the costs were outside of the period of performance for grant. This also impacted the accuracy of Federal fiscal year expenses reported to USDA Food and Nutrition Services. CONTEXT State agencies can only charge allowable costs for obligations incurred during the grant's period of performance. The WIC grant is available for one year, October 1 through September 30, and only obligations incurred during that period can be charged to the grant. The Department of Health and Human Services incurred costs in August 2022 for FFY 2022 for special formula distribution center food outlays that were paid in February 2023 and charged to FFY 2023. A random sample test identified a known error amount is $15,451 with likely projected questioned costs of $71,642. Twenty-six special formula distribution center payments were made during the audit period totaling $604,441. Aside from the projection and based on support provided by DHHS, eight special formula distribution center payments, in addition to the known error from sample testing, totaling $198,289, are likely charged to the incorrect Federal fiscal year. Where sampling was performed, the audit used a non-statistical sampling method. IDENTIFICATION AS A REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend the Department of Health and Human Services establish procedures to ensure WIC special formula distribution center food outlay costs are charged to the proper Federal fiscal year. We also recommend the Department of Health and Human Services work with U.S. Food and Nutrition Services to complete a post closeout adjustment to accurately reflect expenses within the correct Federal fiscal years. DEPARTMENT OF HEALTH AND HUMAN SERVICES RESPONSE The Department of Health and Human Services agrees with the recommendation. See “Management’s Response and Corrective Action” section of this report.
FINDING 2024-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Indiana Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027A, 84.027X, 84.173A, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-144-PN01, 22619-144-PN01, 23611-144-PN01, 23619-144-PN01, 22611-144-ARP, 22619-144-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure that the School Corporation complied with Earmarking compliance requirements. The School Corporation did not have adequate procedures in place to ensure the required level of expenditures for nonpublic school students was met. The School Corporation's payroll-related disbursements for Non-Public Proportionate Share were estimated based on actual hours worked by School Corporation staff at nonpublic schools in the previous school year. This amount was allocated over the biweekly salaries of employees providing services at the nonpublic schools. This resulted in a fixed amount of each biweekly pay being charged to the nonpublic accounts regardless of actual time spent by employees with nonpublic students in the given pay period. There was no reconciliation process between budgeted hours and actual hours worked with nonpublic students during each pay period. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 GREENSBURG COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed, . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Management of the School Corporation had not designed a system of internal controls that would have ensured that time worked by certified staff for nonpublic schools was properly identified. Internal controls in place did not identify that an improper method was used to identify expenditures for nonpublic students with disabilities. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure that the proportionate share required to be expended for nonpublic students was met. 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 the Non-Public Proportionate Share amounts are spent based on actual charged time by staff working with the nonpublic students. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Indiana Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027A, 84.027X, 84.173A, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-144-PN01, 22619-144-PN01, 23611-144-PN01, 23619-144-PN01, 22611-144-ARP, 22619-144-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure that the School Corporation complied with Earmarking compliance requirements. The School Corporation did not have adequate procedures in place to ensure the required level of expenditures for nonpublic school students was met. The School Corporation's payroll-related disbursements for Non-Public Proportionate Share were estimated based on actual hours worked by School Corporation staff at nonpublic schools in the previous school year. This amount was allocated over the biweekly salaries of employees providing services at the nonpublic schools. This resulted in a fixed amount of each biweekly pay being charged to the nonpublic accounts regardless of actual time spent by employees with nonpublic students in the given pay period. There was no reconciliation process between budgeted hours and actual hours worked with nonpublic students during each pay period. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 GREENSBURG COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed, . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Management of the School Corporation had not designed a system of internal controls that would have ensured that time worked by certified staff for nonpublic schools was properly identified. Internal controls in place did not identify that an improper method was used to identify expenditures for nonpublic students with disabilities. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure that the proportionate share required to be expended for nonpublic students was met. 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 the Non-Public Proportionate Share amounts are spent based on actual charged time by staff working with the nonpublic students. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Indiana Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027A, 84.027X, 84.173A, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-144-PN01, 22619-144-PN01, 23611-144-PN01, 23619-144-PN01, 22611-144-ARP, 22619-144-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure that the School Corporation complied with Earmarking compliance requirements. The School Corporation did not have adequate procedures in place to ensure the required level of expenditures for nonpublic school students was met. The School Corporation's payroll-related disbursements for Non-Public Proportionate Share were estimated based on actual hours worked by School Corporation staff at nonpublic schools in the previous school year. This amount was allocated over the biweekly salaries of employees providing services at the nonpublic schools. This resulted in a fixed amount of each biweekly pay being charged to the nonpublic accounts regardless of actual time spent by employees with nonpublic students in the given pay period. There was no reconciliation process between budgeted hours and actual hours worked with nonpublic students during each pay period. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 GREENSBURG COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed, . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Management of the School Corporation had not designed a system of internal controls that would have ensured that time worked by certified staff for nonpublic schools was properly identified. Internal controls in place did not identify that an improper method was used to identify expenditures for nonpublic students with disabilities. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure that the proportionate share required to be expended for nonpublic students was met. 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 the Non-Public Proportionate Share amounts are spent based on actual charged time by staff working with the nonpublic students. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Indiana Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027A, 84.027X, 84.173A, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-144-PN01, 22619-144-PN01, 23611-144-PN01, 23619-144-PN01, 22611-144-ARP, 22619-144-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure that the School Corporation complied with Earmarking compliance requirements. The School Corporation did not have adequate procedures in place to ensure the required level of expenditures for nonpublic school students was met. The School Corporation's payroll-related disbursements for Non-Public Proportionate Share were estimated based on actual hours worked by School Corporation staff at nonpublic schools in the previous school year. This amount was allocated over the biweekly salaries of employees providing services at the nonpublic schools. This resulted in a fixed amount of each biweekly pay being charged to the nonpublic accounts regardless of actual time spent by employees with nonpublic students in the given pay period. There was no reconciliation process between budgeted hours and actual hours worked with nonpublic students during each pay period. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 GREENSBURG COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed, . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Management of the School Corporation had not designed a system of internal controls that would have ensured that time worked by certified staff for nonpublic schools was properly identified. Internal controls in place did not identify that an improper method was used to identify expenditures for nonpublic students with disabilities. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure that the proportionate share required to be expended for nonpublic students was met. 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 the Non-Public Proportionate Share amounts are spent based on actual charged time by staff working with the nonpublic students. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Indiana Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027A, 84.027X, 84.173A, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-144-PN01, 22619-144-PN01, 23611-144-PN01, 23619-144-PN01, 22611-144-ARP, 22619-144-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure that the School Corporation complied with Earmarking compliance requirements. The School Corporation did not have adequate procedures in place to ensure the required level of expenditures for nonpublic school students was met. The School Corporation's payroll-related disbursements for Non-Public Proportionate Share were estimated based on actual hours worked by School Corporation staff at nonpublic schools in the previous school year. This amount was allocated over the biweekly salaries of employees providing services at the nonpublic schools. This resulted in a fixed amount of each biweekly pay being charged to the nonpublic accounts regardless of actual time spent by employees with nonpublic students in the given pay period. There was no reconciliation process between budgeted hours and actual hours worked with nonpublic students during each pay period. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 GREENSBURG COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed, . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Management of the School Corporation had not designed a system of internal controls that would have ensured that time worked by certified staff for nonpublic schools was properly identified. Internal controls in place did not identify that an improper method was used to identify expenditures for nonpublic students with disabilities. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure that the proportionate share required to be expended for nonpublic students was met. 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 the Non-Public Proportionate Share amounts are spent based on actual charged time by staff working with the nonpublic students. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Indiana Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027A, 84.027X, 84.173A, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-144-PN01, 22619-144-PN01, 23611-144-PN01, 23619-144-PN01, 22611-144-ARP, 22619-144-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure that the School Corporation complied with Earmarking compliance requirements. The School Corporation did not have adequate procedures in place to ensure the required level of expenditures for nonpublic school students was met. The School Corporation's payroll-related disbursements for Non-Public Proportionate Share were estimated based on actual hours worked by School Corporation staff at nonpublic schools in the previous school year. This amount was allocated over the biweekly salaries of employees providing services at the nonpublic schools. This resulted in a fixed amount of each biweekly pay being charged to the nonpublic accounts regardless of actual time spent by employees with nonpublic students in the given pay period. There was no reconciliation process between budgeted hours and actual hours worked with nonpublic students during each pay period. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 GREENSBURG COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed, . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Management of the School Corporation had not designed a system of internal controls that would have ensured that time worked by certified staff for nonpublic schools was properly identified. Internal controls in place did not identify that an improper method was used to identify expenditures for nonpublic students with disabilities. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure that the proportionate share required to be expended for nonpublic students was met. 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 the Non-Public Proportionate Share amounts are spent based on actual charged time by staff working with the nonpublic students. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-001 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-046-PN01, 22611-046-ARP, 22619-046-PN01, 22619-046-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation is a member of the Porter County Education Services (Cooperative). During the audit period, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 22611-046-PN01, 22611-046-ARP, 22619-46-PN01, and 22619-046-ARP grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic school budgeted expenditures. As such, the Indiana State Board of Accounts was unable to identify if the minimum amount per the grant award was expended and properly reported to the IDOE as required. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 14 DUNELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Through inquiry of the Cooperative management, they were unaware of the requirements to track nonpublic proportionate share expenditures directly for each member school. While the Cooperative did implement new processes and procedures to ensure expenditures were tracked by member schools starting in July 2022, all of the grant awards had been allocated to the member schools based on a percentage of the budget. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure the Cooperative compliance with earmarking requirements, and the Cooperative was unable to track expenditures for nonpublic services for each member school. Consequently, the amounts requested for reimbursement were not supported by actual expenditures but rather a percentage based on the budget per member school. Because of this, expenditures were not accurately reported to the oversight agency. 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 nonpublic proportionate share funds are appropriately allocated to the member school based on expenditures charged directly on behalf of the member school. Supporting documentation for these expenditures should be retained for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-001 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-046-PN01, 22611-046-ARP, 22619-046-PN01, 22619-046-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation is a member of the Porter County Education Services (Cooperative). During the audit period, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 22611-046-PN01, 22611-046-ARP, 22619-46-PN01, and 22619-046-ARP grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic school budgeted expenditures. As such, the Indiana State Board of Accounts was unable to identify if the minimum amount per the grant award was expended and properly reported to the IDOE as required. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 14 DUNELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Through inquiry of the Cooperative management, they were unaware of the requirements to track nonpublic proportionate share expenditures directly for each member school. While the Cooperative did implement new processes and procedures to ensure expenditures were tracked by member schools starting in July 2022, all of the grant awards had been allocated to the member schools based on a percentage of the budget. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure the Cooperative compliance with earmarking requirements, and the Cooperative was unable to track expenditures for nonpublic services for each member school. Consequently, the amounts requested for reimbursement were not supported by actual expenditures but rather a percentage based on the budget per member school. Because of this, expenditures were not accurately reported to the oversight agency. 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 nonpublic proportionate share funds are appropriately allocated to the member school based on expenditures charged directly on behalf of the member school. Supporting documentation for these expenditures should be retained for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-001 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-046-PN01, 22611-046-ARP, 22619-046-PN01, 22619-046-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation is a member of the Porter County Education Services (Cooperative). During the audit period, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 22611-046-PN01, 22611-046-ARP, 22619-46-PN01, and 22619-046-ARP grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic school budgeted expenditures. As such, the Indiana State Board of Accounts was unable to identify if the minimum amount per the grant award was expended and properly reported to the IDOE as required. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 14 DUNELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Through inquiry of the Cooperative management, they were unaware of the requirements to track nonpublic proportionate share expenditures directly for each member school. While the Cooperative did implement new processes and procedures to ensure expenditures were tracked by member schools starting in July 2022, all of the grant awards had been allocated to the member schools based on a percentage of the budget. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure the Cooperative compliance with earmarking requirements, and the Cooperative was unable to track expenditures for nonpublic services for each member school. Consequently, the amounts requested for reimbursement were not supported by actual expenditures but rather a percentage based on the budget per member school. Because of this, expenditures were not accurately reported to the oversight agency. 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 nonpublic proportionate share funds are appropriately allocated to the member school based on expenditures charged directly on behalf of the member school. Supporting documentation for these expenditures should be retained for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-001 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-046-PN01, 22611-046-ARP, 22619-046-PN01, 22619-046-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation is a member of the Porter County Education Services (Cooperative). During the audit period, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 22611-046-PN01, 22611-046-ARP, 22619-46-PN01, and 22619-046-ARP grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic school budgeted expenditures. As such, the Indiana State Board of Accounts was unable to identify if the minimum amount per the grant award was expended and properly reported to the IDOE as required. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 14 DUNELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Through inquiry of the Cooperative management, they were unaware of the requirements to track nonpublic proportionate share expenditures directly for each member school. While the Cooperative did implement new processes and procedures to ensure expenditures were tracked by member schools starting in July 2022, all of the grant awards had been allocated to the member schools based on a percentage of the budget. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure the Cooperative compliance with earmarking requirements, and the Cooperative was unable to track expenditures for nonpublic services for each member school. Consequently, the amounts requested for reimbursement were not supported by actual expenditures but rather a percentage based on the budget per member school. Because of this, expenditures were not accurately reported to the oversight agency. 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 nonpublic proportionate share funds are appropriately allocated to the member school based on expenditures charged directly on behalf of the member school. Supporting documentation for these expenditures should be retained for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-001 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-046-PN01, 22611-046-ARP, 22619-046-PN01, 22619-046-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation is a member of the Porter County Education Services (Cooperative). During the audit period, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 22611-046-PN01, 22611-046-ARP, 22619-46-PN01, and 22619-046-ARP grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic school budgeted expenditures. As such, the Indiana State Board of Accounts was unable to identify if the minimum amount per the grant award was expended and properly reported to the IDOE as required. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 14 DUNELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Through inquiry of the Cooperative management, they were unaware of the requirements to track nonpublic proportionate share expenditures directly for each member school. While the Cooperative did implement new processes and procedures to ensure expenditures were tracked by member schools starting in July 2022, all of the grant awards had been allocated to the member schools based on a percentage of the budget. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure the Cooperative compliance with earmarking requirements, and the Cooperative was unable to track expenditures for nonpublic services for each member school. Consequently, the amounts requested for reimbursement were not supported by actual expenditures but rather a percentage based on the budget per member school. Because of this, expenditures were not accurately reported to the oversight agency. 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 nonpublic proportionate share funds are appropriately allocated to the member school based on expenditures charged directly on behalf of the member school. Supporting documentation for these expenditures should be retained for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-001 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-046-PN01, 22611-046-ARP, 22619-046-PN01, 22619-046-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation is a member of the Porter County Education Services (Cooperative). During the audit period, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 22611-046-PN01, 22611-046-ARP, 22619-46-PN01, and 22619-046-ARP grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic school budgeted expenditures. As such, the Indiana State Board of Accounts was unable to identify if the minimum amount per the grant award was expended and properly reported to the IDOE as required. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 14 DUNELAND SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Through inquiry of the Cooperative management, they were unaware of the requirements to track nonpublic proportionate share expenditures directly for each member school. While the Cooperative did implement new processes and procedures to ensure expenditures were tracked by member schools starting in July 2022, all of the grant awards had been allocated to the member schools based on a percentage of the budget. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to ensure the Cooperative compliance with earmarking requirements, and the Cooperative was unable to track expenditures for nonpublic services for each member school. Consequently, the amounts requested for reimbursement were not supported by actual expenditures but rather a percentage based on the budget per member school. Because of this, expenditures were not accurately reported to the oversight agency. 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 nonpublic proportionate share funds are appropriately allocated to the member school based on expenditures charged directly on behalf of the member school. Supporting documentation for these expenditures should be retained for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-004 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Special Milk Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.556 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed and Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal controls over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 22 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities A sample of 60 claims was selected for testing. Of the 60 claims selected for testing, 43 claims were vendor claims and 17 were payroll claims. Issues were identified with 5 of the vendor claims as noted below: Three claims, totaling $700, were paid based solely upon summary statements from the vendor. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. Two claims, totaling $313, were paid with no supporting documentation. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. The total amount, $1,013, paid without adequate supporting documentation was considered questioned costs. 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: INDIANA STATE BOARD OF ACCOUNTS 23 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.7(e)(1)(ii) states in part: ". . . use all revenues received by such food service only for the operation or improvement of that food service . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not follow proper recordkeeping procedures. The Treasurer paid claims from federal program funds with no support or based on summary statements. INDIANA STATE BOARD OF ACCOUNTS 24 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, we could not determine if federal program funds were used to pay only for the operation or improvement of the food service. Furthermore, the lack of detailed documentation was not in compliance with the cost principles. Continued payment with no support or only summary statements could lead to payments for unallowable activities and additional questioned costs. Questioned Costs Questioned costs in the amount of $1,013 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards have appropriate supporting documentation to ensure expenditures are allowable per the terms and conditions of the federal award and adhere to the cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-004 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Special Milk Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.556 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed and Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal controls over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 22 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities A sample of 60 claims was selected for testing. Of the 60 claims selected for testing, 43 claims were vendor claims and 17 were payroll claims. Issues were identified with 5 of the vendor claims as noted below: Three claims, totaling $700, were paid based solely upon summary statements from the vendor. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. Two claims, totaling $313, were paid with no supporting documentation. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. The total amount, $1,013, paid without adequate supporting documentation was considered questioned costs. 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: INDIANA STATE BOARD OF ACCOUNTS 23 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.7(e)(1)(ii) states in part: ". . . use all revenues received by such food service only for the operation or improvement of that food service . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not follow proper recordkeeping procedures. The Treasurer paid claims from federal program funds with no support or based on summary statements. INDIANA STATE BOARD OF ACCOUNTS 24 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, we could not determine if federal program funds were used to pay only for the operation or improvement of the food service. Furthermore, the lack of detailed documentation was not in compliance with the cost principles. Continued payment with no support or only summary statements could lead to payments for unallowable activities and additional questioned costs. Questioned Costs Questioned costs in the amount of $1,013 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards have appropriate supporting documentation to ensure expenditures are allowable per the terms and conditions of the federal award and adhere to the cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-004 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Special Milk Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.556 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed and Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal controls over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 22 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities A sample of 60 claims was selected for testing. Of the 60 claims selected for testing, 43 claims were vendor claims and 17 were payroll claims. Issues were identified with 5 of the vendor claims as noted below: Three claims, totaling $700, were paid based solely upon summary statements from the vendor. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. Two claims, totaling $313, were paid with no supporting documentation. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. The total amount, $1,013, paid without adequate supporting documentation was considered questioned costs. 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: INDIANA STATE BOARD OF ACCOUNTS 23 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.7(e)(1)(ii) states in part: ". . . use all revenues received by such food service only for the operation or improvement of that food service . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not follow proper recordkeeping procedures. The Treasurer paid claims from federal program funds with no support or based on summary statements. INDIANA STATE BOARD OF ACCOUNTS 24 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, we could not determine if federal program funds were used to pay only for the operation or improvement of the food service. Furthermore, the lack of detailed documentation was not in compliance with the cost principles. Continued payment with no support or only summary statements could lead to payments for unallowable activities and additional questioned costs. Questioned Costs Questioned costs in the amount of $1,013 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards have appropriate supporting documentation to ensure expenditures are allowable per the terms and conditions of the federal award and adhere to the cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-004 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Special Milk Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.556 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed and Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal controls over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 22 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities A sample of 60 claims was selected for testing. Of the 60 claims selected for testing, 43 claims were vendor claims and 17 were payroll claims. Issues were identified with 5 of the vendor claims as noted below: Three claims, totaling $700, were paid based solely upon summary statements from the vendor. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. Two claims, totaling $313, were paid with no supporting documentation. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. The total amount, $1,013, paid without adequate supporting documentation was considered questioned costs. 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: INDIANA STATE BOARD OF ACCOUNTS 23 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.7(e)(1)(ii) states in part: ". . . use all revenues received by such food service only for the operation or improvement of that food service . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not follow proper recordkeeping procedures. The Treasurer paid claims from federal program funds with no support or based on summary statements. INDIANA STATE BOARD OF ACCOUNTS 24 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, we could not determine if federal program funds were used to pay only for the operation or improvement of the food service. Furthermore, the lack of detailed documentation was not in compliance with the cost principles. Continued payment with no support or only summary statements could lead to payments for unallowable activities and additional questioned costs. Questioned Costs Questioned costs in the amount of $1,013 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards have appropriate supporting documentation to ensure expenditures are allowable per the terms and conditions of the federal award and adhere to the cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-004 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Special Milk Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.556 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed and Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal controls over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 22 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities A sample of 60 claims was selected for testing. Of the 60 claims selected for testing, 43 claims were vendor claims and 17 were payroll claims. Issues were identified with 5 of the vendor claims as noted below: Three claims, totaling $700, were paid based solely upon summary statements from the vendor. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. Two claims, totaling $313, were paid with no supporting documentation. The School Corporation was unable to provide additional documentation, such as invoices, to detail what items or services had been purchased. Without adequate supporting documentation, we could not determine if the expenses incurred were for activities and costs allowable per the grant. The total amount, $1,013, paid without adequate supporting documentation was considered questioned costs. 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: INDIANA STATE BOARD OF ACCOUNTS 23 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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. . . . (g) Be adequately documented. . . ." 7 CFR 210.14(a) states in part: ". . . Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.7(e)(1)(ii) states in part: ". . . use all revenues received by such food service only for the operation or improvement of that food service . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation did not follow proper recordkeeping procedures. The Treasurer paid claims from federal program funds with no support or based on summary statements. INDIANA STATE BOARD OF ACCOUNTS 24 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Additionally, we could not determine if federal program funds were used to pay only for the operation or improvement of the food service. Furthermore, the lack of detailed documentation was not in compliance with the cost principles. Continued payment with no support or only summary statements could lead to payments for unallowable activities and additional questioned costs. Questioned Costs Questioned costs in the amount of $1,013 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards have appropriate supporting documentation to ensure expenditures are allowable per the terms and conditions of the federal award and adhere to the cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-007 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles 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): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 30 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was a participating member in The Exceptional Children's Cooperative (Cooperative) which provided special education services to students on behalf of the School Corporation. The School Corporation utilized $15,672 in program funds to pay for a portion of the School Corporation's required obligations to the Cooperative. This arrangement existed prior to the pandemic, and none of the obligations were related to responding to the pandemic. Additionally, the School Corporation used $12,000 in program funds to pay a retainer fee for information technology services on a contract that existed prior to the COVID-19 pandemic. The School Corporation also used $147,809 in program funds to pay the salary and benefits of a certified staff member who was employed prior to the pandemic and whose job duties were not related to responding to the pandemic. We consider the total of these payments, $175,481, to be questioned costs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 31 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) American Rescue Plan Act section 2001(e) states in part: "Uses of Funds. - A local education agency that receives funds under this section - . . . (2) shall use the remaining funds for any of the following: . . . (E) Coordination of preparedness and response efforts of local education agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. . . . (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. . . . (g) be adequately documented. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation's management had not developed a system of internal controls to ensure that expenditures paid from COVID-19 - Education Stabilization Funds were for costs allowed by the grant terms and conditions and in compliance with the allowable cost principles. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Without a proper system of internal controls in place that operated effectively, material noncompliance that resulted in questioned costs remained undetected. 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 funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 32 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs Questioned costs in the amount of $175,481 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for cost allowed per the terms and conditions of the federal award and in compliance with the allowable cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-007 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles 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): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 30 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was a participating member in The Exceptional Children's Cooperative (Cooperative) which provided special education services to students on behalf of the School Corporation. The School Corporation utilized $15,672 in program funds to pay for a portion of the School Corporation's required obligations to the Cooperative. This arrangement existed prior to the pandemic, and none of the obligations were related to responding to the pandemic. Additionally, the School Corporation used $12,000 in program funds to pay a retainer fee for information technology services on a contract that existed prior to the COVID-19 pandemic. The School Corporation also used $147,809 in program funds to pay the salary and benefits of a certified staff member who was employed prior to the pandemic and whose job duties were not related to responding to the pandemic. We consider the total of these payments, $175,481, to be questioned costs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 31 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) American Rescue Plan Act section 2001(e) states in part: "Uses of Funds. - A local education agency that receives funds under this section - . . . (2) shall use the remaining funds for any of the following: . . . (E) Coordination of preparedness and response efforts of local education agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. . . . (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. . . . (g) be adequately documented. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation's management had not developed a system of internal controls to ensure that expenditures paid from COVID-19 - Education Stabilization Funds were for costs allowed by the grant terms and conditions and in compliance with the allowable cost principles. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Without a proper system of internal controls in place that operated effectively, material noncompliance that resulted in questioned costs remained undetected. 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 funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 32 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs Questioned costs in the amount of $175,481 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for cost allowed per the terms and conditions of the federal award and in compliance with the allowable cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-007 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles 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): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 30 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was a participating member in The Exceptional Children's Cooperative (Cooperative) which provided special education services to students on behalf of the School Corporation. The School Corporation utilized $15,672 in program funds to pay for a portion of the School Corporation's required obligations to the Cooperative. This arrangement existed prior to the pandemic, and none of the obligations were related to responding to the pandemic. Additionally, the School Corporation used $12,000 in program funds to pay a retainer fee for information technology services on a contract that existed prior to the COVID-19 pandemic. The School Corporation also used $147,809 in program funds to pay the salary and benefits of a certified staff member who was employed prior to the pandemic and whose job duties were not related to responding to the pandemic. We consider the total of these payments, $175,481, to be questioned costs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 31 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) American Rescue Plan Act section 2001(e) states in part: "Uses of Funds. - A local education agency that receives funds under this section - . . . (2) shall use the remaining funds for any of the following: . . . (E) Coordination of preparedness and response efforts of local education agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. . . . (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. . . . (g) be adequately documented. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation's management had not developed a system of internal controls to ensure that expenditures paid from COVID-19 - Education Stabilization Funds were for costs allowed by the grant terms and conditions and in compliance with the allowable cost principles. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Without a proper system of internal controls in place that operated effectively, material noncompliance that resulted in questioned costs remained undetected. 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 funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 32 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs Questioned costs in the amount of $175,481 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for cost allowed per the terms and conditions of the federal award and in compliance with the allowable cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-007 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles 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): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal awards. INDIANA STATE BOARD OF ACCOUNTS 30 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Internal control is not one event or circumstance, but a dynamic and iterative process. The internal control process is based on fundamental principles that operate as a whole but are best understood when analyzed individually. The fundamental principles are related to five components of internal control which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in the risk assessment, monitoring, and control activities components. Risk Assessment The School Corporation has not established a formal risk assessment process. There is no documented risk assessment policy, nor is there evidence of periodic risk identification, analysis, or evaluation. Monitoring The School Corporation did not conduct ongoing or periodic reviews to ensure that internal controls were operating as intended and to identify areas for improvement. Furthermore, the School Corporation did not have a process to follow up on corrective actions written as a response to audit findings. Control Activities The School Corporation was a participating member in The Exceptional Children's Cooperative (Cooperative) which provided special education services to students on behalf of the School Corporation. The School Corporation utilized $15,672 in program funds to pay for a portion of the School Corporation's required obligations to the Cooperative. This arrangement existed prior to the pandemic, and none of the obligations were related to responding to the pandemic. Additionally, the School Corporation used $12,000 in program funds to pay a retainer fee for information technology services on a contract that existed prior to the COVID-19 pandemic. The School Corporation also used $147,809 in program funds to pay the salary and benefits of a certified staff member who was employed prior to the pandemic and whose job duties were not related to responding to the pandemic. We consider the total of these payments, $175,481, to be questioned costs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 31 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) American Rescue Plan Act section 2001(e) states in part: "Uses of Funds. - A local education agency that receives funds under this section - . . . (2) shall use the remaining funds for any of the following: . . . (E) Coordination of preparedness and response efforts of local education agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. . . . (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. . . . (g) be adequately documented. . . ." Cause Management of the School Corporation had not taken steps to design and implement policies and procedures to assess risks facing the School Corporation or to establish and operate monitoring activities that monitor the internal control system. Additionally, the School Corporation's management had not developed a system of internal controls to ensure that expenditures paid from COVID-19 - Education Stabilization Funds were for costs allowed by the grant terms and conditions and in compliance with the allowable cost principles. Effect As a result of the five components of internal control not being adequately designed and implemented, the internal control system cannot be effective. Thus, general risks or specific risks from fraud and significant changes could negatively impact the School Corporation, identified internal control deficiencies could continue, and unidentified flaws within the internal control system could exist. Without a proper system of internal controls in place that operated effectively, material noncompliance that resulted in questioned costs remained undetected. 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 funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 32 CANNELTON CITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs Questioned costs in the amount of $175,481 were identified as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls, which would include policies and procedures related to risk assessment and monitoring. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for cost allowed per the terms and conditions of the federal award and in compliance with the allowable cost principles. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Criteria and Condition: According to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), section 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, costs 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. For five of the forty disbursement samples selected, PEBC was unable to provide adequate documentation for the selected items. Two of the samples were noted by management to have been improperly coded to the federal grant. As a result, the auditor was unable to determine the allowability of these sample selections under the Coronavirus State and Local Fiscal Recovery Funds grant related to the student educator test stipend program. Further, the auditor was unable to determine whether costs were incurred during the approved budget period. Cause: The condition was caused by a lack of internal controls over Coronavirus State and Local Fiscal Recovery Funds claims for student educator test stipend expenditures. Effect: When adequate support is not obtained and used to support the amount charged to the federal program or supported by an after-the-fact review, there is a risk that unsupported or inaccurate costs are being charged to the federal program. Context: During testing procedures over Coronavirus State and Local Fiscal Recovery Funds disbursements for the activities allowed or unallowed compliance requirement, the auditor was unable to obtain source documents from management for five of the forty samples. Identification of Repeat Findings: This is not a repeat finding. Recommendation: Proper control activities should be implemented to allow for a consistent, accurate, and allowable method to support distribution of expenditures to federal programs, which could include a consistent multi-stage review process for expenditures that are to be allocated to the Coronavirus State and Local Fiscal Recovery Funds grant. Further, management should clearly organize and retain records to support approved amounts being listed as expenditures on their SEFA.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): 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. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: 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. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.
Program: AL 93.778 - Medical Assistance Program; AL 93.959 - Block Grants for Prevention and Treatment of Substance Abuse; AL 93.767 - Children’s Health Insurance Program; AL 93.575 – Child Care and Development Block Grant; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2405NE5ADM, FFY 2024; 2305NE5ADM, FFY 2023; 23B1NESAPT, FFY 2023; 20242S251443, FFY 2024; 2301NECCDD; FFY 2023; 52305NE3002; FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): 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. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) require payroll expenses charged to Federal awards to be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State accounting system and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. A similar finding was noted in the prior audit. We also noted no attempt was made to recover apparently fraudulent payroll expenses. Repeat Finding: 2023-031 Questioned Costs: $11,866 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 25 employee paychecks paid with Federal funds. Five of the 25 employees tested had payroll charged to the Substance Abuse and Prevention Block Grant (SAPTBG). We tested the May 1, 2024, paycheck for an Administrator. Payroll expenses were allocated 100% to the SAPTBG. However, the Agency could not provide documentation to show that 100% of the Administrator’s time was working on projects related to the SAPTBG. Based on some of the job duties of the employee, it appeared some time could have been coded to the Community Mental Health Services grant. All payroll for the period was questioned. Federal SAPTBG payroll charges tested totaled $6,908, and we noted $2,963 in sampled questioned costs. Federal payroll charges for SAPTBG totaled $473,739. We tested the January 24, 2024, paycheck for an IT Business Systems Analyst and noted the initial payroll expenses were split among several Economic and Assistance programs based on a time study that was effective during fiscal year 2022. Per the Fiscal Project Analyst, an updated study had not been done and should be done annually. The payroll expenses charged to the cost center were then allocated based on a time and effort study that had not been updated since at least September 2020. Payroll expenses charged to the Federal programs were questioned, and potential dollars at risk totaled over $5,000,000. See Schedule of Findings and Questioned Costs for chart/table. Additionally, we reviewed the disciplinary actions against employees during the fiscal year. One employee tested was terminated on September 26, 2023, for falsifying the number of overtime hours worked. While working remotely on Saturday and Sundays, the employee would work only 30-60 minutes; however, he would then claim 10 hours of overtime for both of those days. The Agency reviewed the employee’s overtime hours reported to the supervisor, the KRONOS timecards, and time stamps of the work completed outside the employee’s scheduled shifts for the timeframe of May 7, 2023, through August 11, 2023. The employee reported and was paid for 469.5 overtime hours; however, the Agency determined the employee worked only 34.5 hours of overtime, a difference of 435 hours. The employee was paid $17,052 for overtime hours that were never worked in just a three-month timeframe. During fiscal year 2024, the Medicaid grant was overcharged $7,780 in apparently fraudulent payroll expenses for this employee. The employee was terminated, but no further action was taken against him. Moreover, no attempt was made to recover the amounts paid to the employee for the falsification of hours worked. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State accounting system, and those costs are properly allocated and charged. Management Response: Agency agrees.
Program: AL 84.048 – Career and Technical Education – Basic Grants to States – Allowability Grant Number & Year: V048A220027, FFY 2023 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2024), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2024), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.430(i)(1) (January 1, 2024) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Enclosure A of the “Letter to Chief State School Officers on Granting Administrative Flexibility for Better Measures of Success” (September 7, 2012) provides guidelines for local educational agencies (LEAs), using a substitute system for time-and-effort reporting. Enclosure A states, in relevant part, the following: (2) Under the substitute system, in lieu of personnel activity reports, eligible employees may support a distribution of their salaries and wages through documentation of an established work schedule that meets the standards under section (3). An acceptable work schedule may be in a style and format already used by an LEA. (3) Employee schedules must: a. Indicate the specific activity or cost objective that the employee worked on for each segment of the employee’s schedule; b. Account for the total hours for which each employee is compensated during the period reflected on the employee’s schedule; and c. Be certified at least semiannually and signed by the employee and a supervisory official having firsthand knowledge of the work performed by the employee. Good internal control requires adequate supporting documentation to ensure that expenditures are correct and allowable. Condition: The Agency lacked documentation to support 3 of 11 aid payments tested. Repeat Finding: No Questioned Costs: $34,983 known Statistical Sample: No Context: We randomly selected 11 reimbursement payments to subrecipients for testing. We noted the following: • One reimbursement to a community college included salaries and benefits for two employees for $23,583. Documentation to support the salaries and benefits was inadequate. The Agency provided time and effort certifications, stating that the employees worked 50% on the Career and Technical Federal program and 50% on a different program. However, no other documentation – such as an employee work schedule – was provided to support that this distribution was correct. The $23,583 paid for salaries and benefits are considered questioned costs. • One reimbursement was to an Educational Service Unit (ESU). The ESU made payments to schools in order for the schools to reimburse its teachers for their costs for attending a conference and also paying the teachers a stipend for attending the conference. The payments to teachers were to include $120/night for hotels, $300 for registration fees, $265 for mileage, and $125/day as a stipend for each day the teachers attended the conference. However, documentation was not provided to support that the reimbursements/stipends went to all the teachers, or if the school should have kept the reimbursement if it paid for the hotels and registration fees. Additionally, documentation was lacking to support that all the teachers actually stayed at the hotel or that the school paid for the hotel. Lastly, documentation was not provided to support that the stipend amount was reasonable and approved by appropriate personnel. This resulted in questioned costs of $11,192. • One reimbursement to a school included payments to teachers for attending a conference. One hundred and sixty dollars was paid to 13 teachers based on the U.S. General Services Administration per diem rates for meals and incidental expenses. However, per the conference agenda, lunch was provided for one of the days, so the amount paid per teacher should have been reduced to $144, but it was not. This resulted in questioned costs of $208. Federal payment errors for the sample tested were $34,983. The total sample tested was $1,910,166, and aid payments for the fiscal year totaled $7,485,494. Based on the sample tested, the dollar error rate for the sample was 1.83% ($34,983/$1,910,166), which estimates the potential dollars at risk for fiscal year 2024 to be $136,985 (dollar error rate multiplied by population). Cause: Lack of procedures to ensure all costs were adequately documented. Effect: Without adequate supporting documentation, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency improve procedures to ensure that payments are supported by adequate documentation. Management Response: The Nebraska Department of Education’s Office of Career, Technical, and Adult Education provided emails which detailed the purpose for Sharri’s work within the CTE program. The college provided the time and effort certification for the time period in question for the employee but the documentation from the college did not provide the actual work performed information. The Nebraska Department of Education’s Office of Career, Technical, and Adult Education was able to provide most of this documentation related to the reimbursement for teachers attending the conference but was unable to collect the documentation from some of the schools within the ESU 4 Perkins consortium. ESU 4 was not able to provide a stipend policy, though they were able to provide meeting notes where the stipend policy was outlined ahead of time.
Program: AL 84.126 – Rehabilitation Services Vocational Rehabilitation Grants to States – Period of Performance Grant Number & Year: H126A220039, FFY 2022 Federal Grantor Agency: U.S. Department of Education Criteria: Per 34 CFR § 76.707 (July 1, 2023), work performed by a contractor is obligated on the date the State “makes a binding written commitment to obtain the services.” Per 2 CFR § 3474.1 (January 1, 2024), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403(h) (January 1, 2024), costs “must be incurred during the approved budget period.” The Rehabilitation Service Administration Period of Performance for Formula Grant Awards FAQs (published March 21, 2017) states the following: 8. Can the total cost of a contract be obligated to a grant award if some of the contract services will be performed after the period of performance ends? Yes. If a contract is entered into during a period of performance, but some of the services will be performed after the period of performance ends (in other words, some services would be performed after the FFY of appropriation and the carryover year, if applicable, has ended), the contract would still constitute a valid obligation, as established by 34 CFR 76.707, for purposes of the period of performance in which it was incurred. Good internal control and sound accounting procedures require adequate policies and procedures to ensure that only those expenditures obligated within the period of performance are charged to the grant. Condition: One of 25 expenditures tested was not obligated within the period of performance. Repeat Finding: No Questioned Costs: $2,586 known Statistical Sample: No Context: The Agency paid $2,586 to a provider for job search and placement services that occurred between August 15, 2023, to November 22, 2023. The Agency charged the payment to grant H126A220039, and costs were to be obligated by September 30, 2023, for this grant. The State did not make any written commitment to obtain or pay for these services until October 17, 2023, when the Agency signed an authorization form for said services. As the written commitment was not issued until after September 30, 2023, the payment was not allowed to be charged to the grant. Total questioned costs from the random sample were $2,586. The total sample tested was $39,530, and the total sample population was $5,495,235. Based on the sample tested, the dollar error rate for the sample was 6.54% ($2,586/$39,530), which estimates the potential dollars at risk for fiscal year 2024 to be $359,388 (dollar error rate multiplied by the population). Cause: The Agency lacked proper understanding of when costs should be considered obligated. The Agency reported that it completed the Plan for Job Development on September 3, 2023, and considered it obligated at that time. However, the authorization for the plan was not signed until October 17, 2023. Effect: Without adequate procedures, there is increased risk that the Agency will improperly charge expenditures to the grant outside of its period of performance, resulting in noncompliance. Recommendation: We recommend the Agency strengthen procedures to ensure that expenditures are charged to its grants within the period of performance. Management Response: The agency understands costs are considered obligated at the time of authorization. The case management system is programmed to assign the cost to the grant based on the start date of the service at the time of the obligation (authorization). The programming did not account for a situation when the obligation is created in a different federal fiscal year then the start date of the service. The obligation in question was made on 10/17/23 (FFY23) for a service that started on 8/15/23 (FFY22). The obligation is allowed to be charged to grant H126A220039, but should have been reported as an obligation to the carryover year (FY23) business unit for grant H126A220039, rather than an obligation to the year of appropriation (FFY22) business unit for grant H126A220039. The obligation cannot be charged to the H126A2300390 (FFY23) grant due to service being provided in FFY22. APA Response: Grant H126A220039 had a period of performance end date of September 30, 2023. Any obligation made after this date, including the obligation made on October 17, 2023, would not be allowable to charge to this grant.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): 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. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: 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. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: 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. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): 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. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: 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. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): 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. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.