FINDING 2023-003 Information on the federal program: Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, 22611-022-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency 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 awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 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." FINDING 2023-003 (Continued) Condition: 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 non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. Cause: A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect: Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the earmarking requirements could not be verified as having been met. 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 funding to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation is a member of the Greene Sullivan Special Education Cooperative (Cooperative). During fiscal year 2021-2022 and 2022-2023, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. Although the Cooperative has a separate object code to identify expenditures for the purpose of proportionate share, there is no identifier or separate way to track which member school the funding was expended for. As such, the Non-Public Proportionate Share expenditures for the 19611-022-PN01, 20611- 022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards could not be verified for the individual member schools. Additionally, the Cooperative did not obtain a waiver from the Indiana Department of Education for the amount unspent for the requirement on the 19611-022-PN01 and 20611-022-PN01 grant awards. For the 21611-022-PN01 grant award, a waiver was obtained from the IDOE which was used to cover a portion of the member school's required proportionate share amount; however, the remaining amount, which the Cooperative claimed to have expended, could not be traced to documentation that indicated which member school the expenditure was applied to. For the 22611-022-PN01 grant award, no waiver was obtained, and the amounts spent could not be traced to documentation that indicated which member school the expenditure was applied to. Also, the total amount expended for proportionate share was less than the total amount required when all member school proportionate share requirements were totaled. The lack of internal controls and noncompliance were isolated to the 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards. The minimum earmarking requirement for the 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards were $1,931, $3,486, $6,832, and $1,794, respectively. FINDING 2023-003 (Continued) Identification as a repeat finding: No Recommendation: We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure non-public proportionate share funds are appropriately allocated to the member school based on expenses charged directly on behalf of the member school. Supporting documentation for these expenses should be retained for audit. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-003 Information on the federal program: Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, 22611-022-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency 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 awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 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." FINDING 2023-003 (Continued) Condition: 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 non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. Cause: A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect: Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the earmarking requirements could not be verified as having been met. 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 funding to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation is a member of the Greene Sullivan Special Education Cooperative (Cooperative). During fiscal year 2021-2022 and 2022-2023, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. Although the Cooperative has a separate object code to identify expenditures for the purpose of proportionate share, there is no identifier or separate way to track which member school the funding was expended for. As such, the Non-Public Proportionate Share expenditures for the 19611-022-PN01, 20611- 022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards could not be verified for the individual member schools. Additionally, the Cooperative did not obtain a waiver from the Indiana Department of Education for the amount unspent for the requirement on the 19611-022-PN01 and 20611-022-PN01 grant awards. For the 21611-022-PN01 grant award, a waiver was obtained from the IDOE which was used to cover a portion of the member school's required proportionate share amount; however, the remaining amount, which the Cooperative claimed to have expended, could not be traced to documentation that indicated which member school the expenditure was applied to. For the 22611-022-PN01 grant award, no waiver was obtained, and the amounts spent could not be traced to documentation that indicated which member school the expenditure was applied to. Also, the total amount expended for proportionate share was less than the total amount required when all member school proportionate share requirements were totaled. The lack of internal controls and noncompliance were isolated to the 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards. The minimum earmarking requirement for the 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards were $1,931, $3,486, $6,832, and $1,794, respectively. FINDING 2023-003 (Continued) Identification as a repeat finding: No Recommendation: We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure non-public proportionate share funds are appropriately allocated to the member school based on expenses charged directly on behalf of the member school. Supporting documentation for these expenses should be retained for audit. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-003 Information on the federal program: Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, 22611-022-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency 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 awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 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." FINDING 2023-003 (Continued) Condition: 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 non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. Cause: A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect: Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the earmarking requirements could not be verified as having been met. 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 funding to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation is a member of the Greene Sullivan Special Education Cooperative (Cooperative). During fiscal year 2021-2022 and 2022-2023, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. Although the Cooperative has a separate object code to identify expenditures for the purpose of proportionate share, there is no identifier or separate way to track which member school the funding was expended for. As such, the Non-Public Proportionate Share expenditures for the 19611-022-PN01, 20611- 022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards could not be verified for the individual member schools. Additionally, the Cooperative did not obtain a waiver from the Indiana Department of Education for the amount unspent for the requirement on the 19611-022-PN01 and 20611-022-PN01 grant awards. For the 21611-022-PN01 grant award, a waiver was obtained from the IDOE which was used to cover a portion of the member school's required proportionate share amount; however, the remaining amount, which the Cooperative claimed to have expended, could not be traced to documentation that indicated which member school the expenditure was applied to. For the 22611-022-PN01 grant award, no waiver was obtained, and the amounts spent could not be traced to documentation that indicated which member school the expenditure was applied to. Also, the total amount expended for proportionate share was less than the total amount required when all member school proportionate share requirements were totaled. The lack of internal controls and noncompliance were isolated to the 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards. The minimum earmarking requirement for the 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards were $1,931, $3,486, $6,832, and $1,794, respectively. FINDING 2023-003 (Continued) Identification as a repeat finding: No Recommendation: We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure non-public proportionate share funds are appropriately allocated to the member school based on expenses charged directly on behalf of the member school. Supporting documentation for these expenses should be retained for audit. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-003 Information on the federal program: Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, 22611-022-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency 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 awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 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." FINDING 2023-003 (Continued) Condition: 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 non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. Cause: A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect: Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the earmarking requirements could not be verified as having been met. 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 funding to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation is a member of the Greene Sullivan Special Education Cooperative (Cooperative). During fiscal year 2021-2022 and 2022-2023, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. Although the Cooperative has a separate object code to identify expenditures for the purpose of proportionate share, there is no identifier or separate way to track which member school the funding was expended for. As such, the Non-Public Proportionate Share expenditures for the 19611-022-PN01, 20611- 022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards could not be verified for the individual member schools. Additionally, the Cooperative did not obtain a waiver from the Indiana Department of Education for the amount unspent for the requirement on the 19611-022-PN01 and 20611-022-PN01 grant awards. For the 21611-022-PN01 grant award, a waiver was obtained from the IDOE which was used to cover a portion of the member school's required proportionate share amount; however, the remaining amount, which the Cooperative claimed to have expended, could not be traced to documentation that indicated which member school the expenditure was applied to. For the 22611-022-PN01 grant award, no waiver was obtained, and the amounts spent could not be traced to documentation that indicated which member school the expenditure was applied to. Also, the total amount expended for proportionate share was less than the total amount required when all member school proportionate share requirements were totaled. The lack of internal controls and noncompliance were isolated to the 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards. The minimum earmarking requirement for the 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, and 22611-022-PN01 grant awards were $1,931, $3,486, $6,832, and $1,794, respectively. FINDING 2023-003 (Continued) Identification as a repeat finding: No Recommendation: We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure non-public proportionate share funds are appropriately allocated to the member school based on expenses charged directly on behalf of the member school. Supporting documentation for these expenses should be retained for audit. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
2023‐001 – SIGNIFICANT DEFICIENCY – Internal Controls over Allowable Costs Department of Health and Human Services – Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution – ALN #93.498 – Program Years 2021 and 2022 Criteria: Per 2 CFR 200.303(a) and 2 CFR 200.403(g) non‐federal entities are required to establish and maintain effective internal controls over federal awards and adequately document costs charged to federal programs. Condition: For 10 out of the 60 expenses sampled, CommCare did not maintain the appropriate employee benefits enrollment forms. Cause: Appropriate policies and procedures were not implemented to maintain the appropriate employee benefits enrollment forms. Effect: Unallowable costs could be charged to federal grants and may be required to be repaid to the federal agency. Questioned Costs: None Auditor’s Recommendation: We recommend that CommCare design, implement, and monitor controls to ensure the appropriate benefits enrollment forms are maintained. Management Response: See corrective action plan on page 49.
Type of Finding: Significant Deficiency in Internal Control over Compliance Federal Agency: Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: DA-202201-00320-2022, DA-251-2022, DA-230-2022 Pass-Through Agency: King County Regional Homelessness Authority Pass-Through Number(s): DA-202201-00320, DA-251, DA-230 Award Period: January 1, 2022, to December 31, 2022, January 1, 2022, to December 31, 2022, January 1, 2022, to December 31, 2022 Criteria or specific requirement: 2 CFR 200.303(a) states that a 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)". In addition, 2 CFR 200.414(f) states that "...As described in § 200.403, costs must be consistently charged as either indirect or direct costs but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time". Condition: During testing of indirect costs, 3 of the 11 contracts tested exceeded the 10% de minimis indirect cost rate elected by the organization. Questioned costs: ALN Contract Known Questioned Costs Likely Questioned Costs 21.027 DA-202201-00320 $5,554 None 21.027 DA-251 $22,994 None 21.027 DA-230 $463 None Context: CLA tested the entire population (11 contracts) for indirect costs charged to the major program. Of the contracts tested, 3 were found to be out of compliance with the provisions for 2 CFR 200.303(a) and 2 CFR 200.414(f). Indirect costs exceeding the 10% de minimis cost rate elected by CCS totaled $29,011. Cause: Due to the high volume of client assistance in these programs, there can be several general ledger reclassifications in each month. This is because clients may be eligible for a specific funding source or contract that differs from the original coding. This can lead to multiple general ledgers being sent between the accounting department and the program compliance teams. At times there has been a lack of communication to confirm the general ledger is finalized with indirect at 10%. Program managers will accidentally invoice before the adjustment. Effect: Without adequate documentation and controls in place to ensure costs are reasonable and intended for the program charged, CCS could incorrectly charge expenditures to the federal program, report fraudulent expenditures, or not request appropriate reimbursement that CCS is entitled to under the terms of the grant. Inadequate allocation of indirect costs to federal programs may result in noncompliance with grant regulations, which could result in penalties or repayment obligations. Repeat Finding: No. Recommendation: CLA recommends that emphasis be placed during the billing process to ensure that no more than the 10% de minimis cost rate is charged each month. Views of responsible officials: There is no disagreement with the audit finding.
Type of Finding: Significant Deficiency in Internal Control over Compliance Federal Agency: Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: DA-202201-00320-2022, DA-251-2022, DA-230-2022 Pass-Through Agency: King County Regional Homelessness Authority Pass-Through Number(s): DA-202201-00320, DA-251, DA-230 Award Period: January 1, 2022, to December 31, 2022, January 1, 2022, to December 31, 2022, January 1, 2022, to December 31, 2022 Criteria or specific requirement: 2 CFR 200.303(a) states that a 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)". In addition, 2 CFR 200.414(f) states that "...As described in § 200.403, costs must be consistently charged as either indirect or direct costs but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time". Condition: During testing of indirect costs, 3 of the 11 contracts tested exceeded the 10% de minimis indirect cost rate elected by the organization. Questioned costs: ALN Contract Known Questioned Costs Likely Questioned Costs 21.027 DA-202201-00320 $5,554 None 21.027 DA-251 $22,994 None 21.027 DA-230 $463 None Context: CLA tested the entire population (11 contracts) for indirect costs charged to the major program. Of the contracts tested, 3 were found to be out of compliance with the provisions for 2 CFR 200.303(a) and 2 CFR 200.414(f). Indirect costs exceeding the 10% de minimis cost rate elected by CCS totaled $29,011. Cause: Due to the high volume of client assistance in these programs, there can be several general ledger reclassifications in each month. This is because clients may be eligible for a specific funding source or contract that differs from the original coding. This can lead to multiple general ledgers being sent between the accounting department and the program compliance teams. At times there has been a lack of communication to confirm the general ledger is finalized with indirect at 10%. Program managers will accidentally invoice before the adjustment. Effect: Without adequate documentation and controls in place to ensure costs are reasonable and intended for the program charged, CCS could incorrectly charge expenditures to the federal program, report fraudulent expenditures, or not request appropriate reimbursement that CCS is entitled to under the terms of the grant. Inadequate allocation of indirect costs to federal programs may result in noncompliance with grant regulations, which could result in penalties or repayment obligations. Repeat Finding: No. Recommendation: CLA recommends that emphasis be placed during the billing process to ensure that no more than the 10% de minimis cost rate is charged each month. Views of responsible officials: There is no disagreement with the audit finding.
Type of Finding: Significant Deficiency in Internal Control over Compliance Federal Agency: Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: DA-202201-00320-2022, DA-251-2022, DA-230-2022 Pass-Through Agency: King County Regional Homelessness Authority Pass-Through Number(s): DA-202201-00320, DA-251, DA-230 Award Period: January 1, 2022, to December 31, 2022, January 1, 2022, to December 31, 2022, January 1, 2022, to December 31, 2022 Criteria or specific requirement: 2 CFR 200.303(a) states that a 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)". In addition, 2 CFR 200.414(f) states that "...As described in § 200.403, costs must be consistently charged as either indirect or direct costs but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time". Condition: During testing of indirect costs, 3 of the 11 contracts tested exceeded the 10% de minimis indirect cost rate elected by the organization. Questioned costs: ALN Contract Known Questioned Costs Likely Questioned Costs 21.027 DA-202201-00320 $5,554 None 21.027 DA-251 $22,994 None 21.027 DA-230 $463 None Context: CLA tested the entire population (11 contracts) for indirect costs charged to the major program. Of the contracts tested, 3 were found to be out of compliance with the provisions for 2 CFR 200.303(a) and 2 CFR 200.414(f). Indirect costs exceeding the 10% de minimis cost rate elected by CCS totaled $29,011. Cause: Due to the high volume of client assistance in these programs, there can be several general ledger reclassifications in each month. This is because clients may be eligible for a specific funding source or contract that differs from the original coding. This can lead to multiple general ledgers being sent between the accounting department and the program compliance teams. At times there has been a lack of communication to confirm the general ledger is finalized with indirect at 10%. Program managers will accidentally invoice before the adjustment. Effect: Without adequate documentation and controls in place to ensure costs are reasonable and intended for the program charged, CCS could incorrectly charge expenditures to the federal program, report fraudulent expenditures, or not request appropriate reimbursement that CCS is entitled to under the terms of the grant. Inadequate allocation of indirect costs to federal programs may result in noncompliance with grant regulations, which could result in penalties or repayment obligations. Repeat Finding: No. Recommendation: CLA recommends that emphasis be placed during the billing process to ensure that no more than the 10% de minimis cost rate is charged each month. Views of responsible officials: There is no disagreement with the audit finding.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021-2022, FY 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not designed or implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and only for the operation of the food service program. The School Corporation entered into two cost reimbursement contracts with two food service management companies (FSMC) during the audit period. Four invoices for payment to the FSMC, which totaled $746,491, were selected for testing. Supporting documentation was presented for only $319,679 of the costs invoiced. Due to the lack of supporting documentation, we were unable to determine if the remaining costs paid, $426,812, were allowable expenditures. The costs that were not properly documented were considered questioned costs. In the supporting documentation presented for audit, sales tax was erroneously paid totaling $861. These unallowable costs 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 23 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 manner suitable for contract cost determination and verification. (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: "(a) 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. INDIANA STATE BOARD OF ACCOUNTS 24 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and only for the operation of the school food program. In addition, unallowable costs, sales tax, were paid. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Service Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $427,673 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and only allowable costs are paid from the school food accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021-2022, FY 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not designed or implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and only for the operation of the food service program. The School Corporation entered into two cost reimbursement contracts with two food service management companies (FSMC) during the audit period. Four invoices for payment to the FSMC, which totaled $746,491, were selected for testing. Supporting documentation was presented for only $319,679 of the costs invoiced. Due to the lack of supporting documentation, we were unable to determine if the remaining costs paid, $426,812, were allowable expenditures. The costs that were not properly documented were considered questioned costs. In the supporting documentation presented for audit, sales tax was erroneously paid totaling $861. These unallowable costs 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 23 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 manner suitable for contract cost determination and verification. (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: "(a) 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. INDIANA STATE BOARD OF ACCOUNTS 24 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and only for the operation of the school food program. In addition, unallowable costs, sales tax, were paid. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Service Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $427,673 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and only allowable costs are paid from the school food accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021-2022, FY 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not designed or implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and only for the operation of the food service program. The School Corporation entered into two cost reimbursement contracts with two food service management companies (FSMC) during the audit period. Four invoices for payment to the FSMC, which totaled $746,491, were selected for testing. Supporting documentation was presented for only $319,679 of the costs invoiced. Due to the lack of supporting documentation, we were unable to determine if the remaining costs paid, $426,812, were allowable expenditures. The costs that were not properly documented were considered questioned costs. In the supporting documentation presented for audit, sales tax was erroneously paid totaling $861. These unallowable costs 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 23 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 manner suitable for contract cost determination and verification. (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: "(a) 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. INDIANA STATE BOARD OF ACCOUNTS 24 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and only for the operation of the school food program. In addition, unallowable costs, sales tax, were paid. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Service Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $427,673 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and only allowable costs are paid from the school food accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021-2022, FY 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not designed or implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and only for the operation of the food service program. The School Corporation entered into two cost reimbursement contracts with two food service management companies (FSMC) during the audit period. Four invoices for payment to the FSMC, which totaled $746,491, were selected for testing. Supporting documentation was presented for only $319,679 of the costs invoiced. Due to the lack of supporting documentation, we were unable to determine if the remaining costs paid, $426,812, were allowable expenditures. The costs that were not properly documented were considered questioned costs. In the supporting documentation presented for audit, sales tax was erroneously paid totaling $861. These unallowable costs 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 23 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 manner suitable for contract cost determination and verification. (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: "(a) 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. INDIANA STATE BOARD OF ACCOUNTS 24 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and only for the operation of the school food program. In addition, unallowable costs, sales tax, were paid. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Service Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $427,673 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and only allowable costs are paid from the school food accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021-2022, FY 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not designed or implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and only for the operation of the food service program. The School Corporation entered into two cost reimbursement contracts with two food service management companies (FSMC) during the audit period. Four invoices for payment to the FSMC, which totaled $746,491, were selected for testing. Supporting documentation was presented for only $319,679 of the costs invoiced. Due to the lack of supporting documentation, we were unable to determine if the remaining costs paid, $426,812, were allowable expenditures. The costs that were not properly documented were considered questioned costs. In the supporting documentation presented for audit, sales tax was erroneously paid totaling $861. These unallowable costs 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 23 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 manner suitable for contract cost determination and verification. (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: "(a) 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. INDIANA STATE BOARD OF ACCOUNTS 24 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and only for the operation of the school food program. In addition, unallowable costs, sales tax, were paid. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Service Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $427,673 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and only allowable costs are paid from the school food accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021-2022, FY 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not designed or implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and only for the operation of the food service program. The School Corporation entered into two cost reimbursement contracts with two food service management companies (FSMC) during the audit period. Four invoices for payment to the FSMC, which totaled $746,491, were selected for testing. Supporting documentation was presented for only $319,679 of the costs invoiced. Due to the lack of supporting documentation, we were unable to determine if the remaining costs paid, $426,812, were allowable expenditures. The costs that were not properly documented were considered questioned costs. In the supporting documentation presented for audit, sales tax was erroneously paid totaling $861. These unallowable costs 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 23 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 manner suitable for contract cost determination and verification. (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: "(a) 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. INDIANA STATE BOARD OF ACCOUNTS 24 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and only for the operation of the school food program. In addition, unallowable costs, sales tax, were paid. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Service Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $427,673 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and only allowable costs are paid from the school food accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021-2022, FY 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not designed or implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and only for the operation of the food service program. The School Corporation entered into two cost reimbursement contracts with two food service management companies (FSMC) during the audit period. Four invoices for payment to the FSMC, which totaled $746,491, were selected for testing. Supporting documentation was presented for only $319,679 of the costs invoiced. Due to the lack of supporting documentation, we were unable to determine if the remaining costs paid, $426,812, were allowable expenditures. The costs that were not properly documented were considered questioned costs. In the supporting documentation presented for audit, sales tax was erroneously paid totaling $861. These unallowable costs 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 23 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 manner suitable for contract cost determination and verification. (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: "(a) 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. INDIANA STATE BOARD OF ACCOUNTS 24 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and only for the operation of the school food program. In addition, unallowable costs, sales tax, were paid. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Service Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $427,673 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and only allowable costs are paid from the school food accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021-2022, FY 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not designed or implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and only for the operation of the food service program. The School Corporation entered into two cost reimbursement contracts with two food service management companies (FSMC) during the audit period. Four invoices for payment to the FSMC, which totaled $746,491, were selected for testing. Supporting documentation was presented for only $319,679 of the costs invoiced. Due to the lack of supporting documentation, we were unable to determine if the remaining costs paid, $426,812, were allowable expenditures. The costs that were not properly documented were considered questioned costs. In the supporting documentation presented for audit, sales tax was erroneously paid totaling $861. These unallowable costs 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 23 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 manner suitable for contract cost determination and verification. (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: "(a) 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. INDIANA STATE BOARD OF ACCOUNTS 24 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and only for the operation of the school food program. In addition, unallowable costs, sales tax, were paid. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Service Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $427,673 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and only allowable costs are paid from the school food accounts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FA 2023-001 Improve Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Cash Management Program Income Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Number: S425U210012 Questioned Costs: $309,623 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Elementary and Secondary School Emergency Relief Fund program. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $18,867,709 were expended and reported on the Clarke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” In addition, provisions included in the Uniform Guidance, Section 202.403 – Reasonable Costs state that “a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award… (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.” Furthermore, provisions included in the Uniform Guidance, Section 200.305(b)(5) state that “To the extent available, the non-Federal entity must disburse funds available from program income… before requesting additional cash payments.” Lastly, provisions included in the Uniform Guidance, Section 200.307(e)(1) state that “ordinarily program income must be deducted from total allowable costs to determine the net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise…” Condition: Auditors performed a review of expenditure activity associated with the ESSER program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that ESSER funds were utilized to cover after-school program expenditures that exceeded net allowable costs. The School District incurred $1,765,203 in expenditures and received $913,744 in program income related to the after-school program. Based upon this activity, the net allowable costs that could have been funded by the ESSER program totaled $851,459; however, the School District received $1,161,082 in ESSER funding for this purpose during the period under review. Therefore, expenditures totaling $309,623 were deemed unallowable for the ESSER program, and it was noted that excessive cash drawdowns in this same amount were made. Questioned Costs: Known questioned costs of $309,623 identified for unallowable expenditures. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: Per management personnel, schools experienced a significant shortfall in revenue with the closure of schools due to the pandemic. By covering the after-school program payroll with ESSER funds, the School District was attempting to reestablish a fund balance for their after-school program, which should be self-sustaining, and was unaware that they could not use ESSER funds to accomplish this. Effect: The School District is not in compliance with the Uniform Guidance, ED, or GaDOE guidance related to the ESSER program. Failure to ensure that appropriate policies and procedures are followed when expending federal funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are allowable and program income is expended prior to requesting additional cash payments from federal funds. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with applicable policies and procedures. Views of Responsible Officials: We concur with this finding.
FINDING 2023-001 Subject: Emergency Connectivity Fund Program - Allowable Costs/Cost Principles, Special Tests and Provisions - Restricted Purpose Federal Agency: Federal Communications Commission Federal Program: Emergency Connectivity Fund Program Assistance Listings Number: 32.009 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY 2023 Compliance Requirements: Allowable Costs/Cost Principles, Special Tests and Provisions - Restricted Purpose Audit Findings: Material Weakness, Modified Opinion Condition and Context The Emergency Connectivity Fund (ECF) Program established by the American Rescue Plan Act of 2021 was for the purchase of eligible equipment, advanced communications, and information services for use by students, school staff, and library patrons at locations that include locations other than at a school or library. The ECF Program provides funding to meet the remote learning needs of students, school staff, and library patrons who would otherwise lack access to connected devices and broadband connections sufficient to engage in remote learning during the COVID-19 emergency period. To ensure that funding is focused on unmet need, the grantor agency required schools to certify, as part of their funding application, that they are only seeking support for eligible equipment and/or broadband connectivity to provide to students and school staff who would otherwise lack access to connected devices and/or broadband connectivity sufficient to engage in remote learning. The unmet need at the time of the funding application can be based on an estimate. However, when the school corporation files the request for reimbursement, only equipment and services provided to students or school staff who would otherwise lack broadband services and/or devices sufficient to engage in remote learning should be requested. The School Corporation made four reimbursement requests during the audit period. All four reimbursement requests were selected for testing to verify the expenditures were in conformance with the applicable cost principles. Of the four reimbursement requests tested, issues were identified with three of the reimbursement requests. The issues identified were as follows: For two reimbursement requests, the amount requested, in total, exceeded the expenditures posted to the grant fund. The total amount requested for reimbursement was $616,800; however, total expenditures in the fund were $615,400. As such, the amount requested and received exceeded the amount spent out of the grant fund by $1,400. The School Corporation did not perform a reconciliation, which would have identified the error and allowed them to move the associated expenses to the grant fund, nor did the School Corporation return the additional funds to the grantor agency. At the end of the audit period, the $1,400 was included in the fund's overall ending cash balance. INDIANA STATE BOARD OF ACCOUNTS 18 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) For one reimbursement request, although an invoice was submitted as evidence of expenditures, the funding received from the grantor agency was not used to pay the invoice. Instead, the School Corporation paid for that invoice using a lease and opted instead to use the funding received over the course of the next five years to cover maintenance and service costs for school technology. This information was not disclosed with the initial reimbursement request nor has a substitution request been sent to the awarding agency. The amount received from the grantor agency and not paid to the vendor, $500,000, will be considered questioned costs. At the end of the audit period, this money had not been expended, and was included in the fund's overall ending cash balance. The lack of internal controls and noncompliance were isolated to the two reimbursements noted above. 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: (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. . . ." 47 CFR 54.1710(a)(1) states in part: "The FCC Form 471 shall be signed by a person authorized to order eligible services for the eligible school, library, or consortium and shall include that person's certification under penalty of perjury that: . . . (vii) The school or school consortium listed on the FCC Form 471 application is only seeking support for eligible equipment and/or services provided to students and school staff who would otherwise lack connected devices and/or broadband services sufficient to engage in remote learning. . . ." INDIANA STATE BOARD OF ACCOUNTS 19 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 47 CFR 54.1710(b) states in part: "(1) A request by an applicant to substitute equipment or service for one identified on its FCC Form 471 must be in writing. (2) The Administrator shall approve such written request where: (i) The equipment or service has the same functionality; and (ii) This substitution does not violate any contract provisions or state, local, or Tribal procurement laws. . . . " 47 CFR 54.1711(a)(1) states in part: "The FCC Form 472 shall be signed by a person authorized to order eligible services for the eligible school, library, or consortium and shall include that person's certification under penalty of perjury that: . . . (iv) The funds sought in the request for reimbursement are for eligible equipment and/or services that were purchased or ordered in accordance with the Emergency Connectivity Fund Program rules and requirements in this subpart and received by either the school, library, or consortium, or the students, school staff, or library patrons as appropriate. (v) The portion of the costs eligible for reimbursement and not already paid for by another source was either paid for in full by the school, library, consortium, or will be paid to the service provider within 30 days of receipt of funds. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, reimbursements in excess of expenditures were received and retained by the School Corporation. In addition, reimbursements received were not used to pay the invoices for which the reimbursement was sought. 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 funding to the School Corporation. Questioned Costs Known questioned costs of $500,000 were identified as detailed in the Condition and Context. INDIANA STATE BOARD OF ACCOUNTS 20 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the School Corporation establish a system of internal controls and develop policies and procedures to ensure reimbursement requests are used to pay the invoices used to support the request and that only the amount spent is requested for reimbursement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-001 Subject: Emergency Connectivity Fund Program - Allowable Costs/Cost Principles, Special Tests and Provisions - Restricted Purpose Federal Agency: Federal Communications Commission Federal Program: Emergency Connectivity Fund Program Assistance Listings Number: 32.009 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY 2023 Compliance Requirements: Allowable Costs/Cost Principles, Special Tests and Provisions - Restricted Purpose Audit Findings: Material Weakness, Modified Opinion Condition and Context The Emergency Connectivity Fund (ECF) Program established by the American Rescue Plan Act of 2021 was for the purchase of eligible equipment, advanced communications, and information services for use by students, school staff, and library patrons at locations that include locations other than at a school or library. The ECF Program provides funding to meet the remote learning needs of students, school staff, and library patrons who would otherwise lack access to connected devices and broadband connections sufficient to engage in remote learning during the COVID-19 emergency period. To ensure that funding is focused on unmet need, the grantor agency required schools to certify, as part of their funding application, that they are only seeking support for eligible equipment and/or broadband connectivity to provide to students and school staff who would otherwise lack access to connected devices and/or broadband connectivity sufficient to engage in remote learning. The unmet need at the time of the funding application can be based on an estimate. However, when the school corporation files the request for reimbursement, only equipment and services provided to students or school staff who would otherwise lack broadband services and/or devices sufficient to engage in remote learning should be requested. The School Corporation made four reimbursement requests during the audit period. All four reimbursement requests were selected for testing to verify the expenditures were in conformance with the applicable cost principles. Of the four reimbursement requests tested, issues were identified with three of the reimbursement requests. The issues identified were as follows: For two reimbursement requests, the amount requested, in total, exceeded the expenditures posted to the grant fund. The total amount requested for reimbursement was $616,800; however, total expenditures in the fund were $615,400. As such, the amount requested and received exceeded the amount spent out of the grant fund by $1,400. The School Corporation did not perform a reconciliation, which would have identified the error and allowed them to move the associated expenses to the grant fund, nor did the School Corporation return the additional funds to the grantor agency. At the end of the audit period, the $1,400 was included in the fund's overall ending cash balance. INDIANA STATE BOARD OF ACCOUNTS 18 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) For one reimbursement request, although an invoice was submitted as evidence of expenditures, the funding received from the grantor agency was not used to pay the invoice. Instead, the School Corporation paid for that invoice using a lease and opted instead to use the funding received over the course of the next five years to cover maintenance and service costs for school technology. This information was not disclosed with the initial reimbursement request nor has a substitution request been sent to the awarding agency. The amount received from the grantor agency and not paid to the vendor, $500,000, will be considered questioned costs. At the end of the audit period, this money had not been expended, and was included in the fund's overall ending cash balance. The lack of internal controls and noncompliance were isolated to the two reimbursements noted above. 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: (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. . . ." 47 CFR 54.1710(a)(1) states in part: "The FCC Form 471 shall be signed by a person authorized to order eligible services for the eligible school, library, or consortium and shall include that person's certification under penalty of perjury that: . . . (vii) The school or school consortium listed on the FCC Form 471 application is only seeking support for eligible equipment and/or services provided to students and school staff who would otherwise lack connected devices and/or broadband services sufficient to engage in remote learning. . . ." INDIANA STATE BOARD OF ACCOUNTS 19 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 47 CFR 54.1710(b) states in part: "(1) A request by an applicant to substitute equipment or service for one identified on its FCC Form 471 must be in writing. (2) The Administrator shall approve such written request where: (i) The equipment or service has the same functionality; and (ii) This substitution does not violate any contract provisions or state, local, or Tribal procurement laws. . . . " 47 CFR 54.1711(a)(1) states in part: "The FCC Form 472 shall be signed by a person authorized to order eligible services for the eligible school, library, or consortium and shall include that person's certification under penalty of perjury that: . . . (iv) The funds sought in the request for reimbursement are for eligible equipment and/or services that were purchased or ordered in accordance with the Emergency Connectivity Fund Program rules and requirements in this subpart and received by either the school, library, or consortium, or the students, school staff, or library patrons as appropriate. (v) The portion of the costs eligible for reimbursement and not already paid for by another source was either paid for in full by the school, library, consortium, or will be paid to the service provider within 30 days of receipt of funds. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, reimbursements in excess of expenditures were received and retained by the School Corporation. In addition, reimbursements received were not used to pay the invoices for which the reimbursement was sought. 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 funding to the School Corporation. Questioned Costs Known questioned costs of $500,000 were identified as detailed in the Condition and Context. INDIANA STATE BOARD OF ACCOUNTS 20 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the School Corporation establish a system of internal controls and develop policies and procedures to ensure reimbursement requests are used to pay the invoices used to support the request and that only the amount spent is requested for reimbursement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 20611-021-PN01, 21611-021-PN01, 22619-021-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-003. Condition and Context The School Corporation is a member of the Greater Lafayette Area Special Services Cooperative (Cooperative). During fiscal years 2021-2022 and 2022-2023, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school corporation, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. 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 20611-021-PN01, 21611-021-PN01, and 22619-021-PN01 grant awards could not be verified for the individual member school corporations. 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, we were unable to identify if the minimum amount per the grant awards was expended and properly reported to the IDOE as required. The lack of internal controls and noncompliance were isolated to the 20611-021-PN01, 21611-021-PN01, and 22619-021-PN01 grant awards. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 25 LAFAYETTE 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 200.403 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 A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the school's Non-Public Proportionate Share expenditures could not be determined, and it could not be determined if the School Corporation met their minimum Non-Public Proportionate Share as required by the grant agreement. 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 funding to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 26 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 school share funds are appropriately allocated to the member school corporation based on expenses charged directly on behalf of the member school corporation. Supporting documentation for these expenses 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. INDIANA STATE BOARD OF ACCOUNTS 27
FINDING 2023-004 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 20611-021-PN01, 21611-021-PN01, 22619-021-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-003. Condition and Context The School Corporation is a member of the Greater Lafayette Area Special Services Cooperative (Cooperative). During fiscal years 2021-2022 and 2022-2023, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school corporation, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. 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 20611-021-PN01, 21611-021-PN01, and 22619-021-PN01 grant awards could not be verified for the individual member school corporations. 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, we were unable to identify if the minimum amount per the grant awards was expended and properly reported to the IDOE as required. The lack of internal controls and noncompliance were isolated to the 20611-021-PN01, 21611-021-PN01, and 22619-021-PN01 grant awards. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 25 LAFAYETTE 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 200.403 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 A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the school's Non-Public Proportionate Share expenditures could not be determined, and it could not be determined if the School Corporation met their minimum Non-Public Proportionate Share as required by the grant agreement. 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 funding to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 26 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 school share funds are appropriately allocated to the member school corporation based on expenses charged directly on behalf of the member school corporation. Supporting documentation for these expenses 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. INDIANA STATE BOARD OF ACCOUNTS 27
FINDING 2023-004 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 20611-021-PN01, 21611-021-PN01, 22619-021-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-003. Condition and Context The School Corporation is a member of the Greater Lafayette Area Special Services Cooperative (Cooperative). During fiscal years 2021-2022 and 2022-2023, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school corporation, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. 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 20611-021-PN01, 21611-021-PN01, and 22619-021-PN01 grant awards could not be verified for the individual member school corporations. 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, we were unable to identify if the minimum amount per the grant awards was expended and properly reported to the IDOE as required. The lack of internal controls and noncompliance were isolated to the 20611-021-PN01, 21611-021-PN01, and 22619-021-PN01 grant awards. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 25 LAFAYETTE 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 200.403 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 A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the school's Non-Public Proportionate Share expenditures could not be determined, and it could not be determined if the School Corporation met their minimum Non-Public Proportionate Share as required by the grant agreement. 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 funding to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 26 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 school share funds are appropriately allocated to the member school corporation based on expenses charged directly on behalf of the member school corporation. Supporting documentation for these expenses 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. INDIANA STATE BOARD OF ACCOUNTS 27
FINDING 2023-004 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 20611-021-PN01, 21611-021-PN01, 22619-021-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-003. Condition and Context The School Corporation is a member of the Greater Lafayette Area Special Services Cooperative (Cooperative). During fiscal years 2021-2022 and 2022-2023, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school corporation, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. 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 20611-021-PN01, 21611-021-PN01, and 22619-021-PN01 grant awards could not be verified for the individual member school corporations. 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, we were unable to identify if the minimum amount per the grant awards was expended and properly reported to the IDOE as required. The lack of internal controls and noncompliance were isolated to the 20611-021-PN01, 21611-021-PN01, and 22619-021-PN01 grant awards. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 25 LAFAYETTE 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 200.403 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 A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the school's Non-Public Proportionate Share expenditures could not be determined, and it could not be determined if the School Corporation met their minimum Non-Public Proportionate Share as required by the grant agreement. 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 funding to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 26 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 school share funds are appropriately allocated to the member school corporation based on expenses charged directly on behalf of the member school corporation. Supporting documentation for these expenses 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. INDIANA STATE BOARD OF ACCOUNTS 27
Reference Number: 2023-007 Prior Year Finding: 2023-016 Federal Agency: U.S. Department of Labor State Agency: Vermont Department of Labor Federal Program: Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: UI393532355A50 (10/1/2022 – 12/31/2025) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: 2 CFR section 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. (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. Control: Per 2 CFR section 200.303(a), a 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 comply 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). Condition: The Department of Labor (Department) charged costs to the program that were issued without documentation of supervisory review and approval. Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Context: For four of sixty general disbursement transactions selected for testing, the Department was unable to provide documentation of supervisory review and approval prior to issuance of payment to the vendor. Cause: The Department’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Internal controls did not prevent or detect the errors. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Questioned costs: None noted. The costs were determined to be allowable. Recommendation: We recommend the Department reviews and enhances its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: The Department acknowledges and accepts this finding.
Reference Number: 2023-007 Prior Year Finding: 2023-016 Federal Agency: U.S. Department of Labor State Agency: Vermont Department of Labor Federal Program: Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: UI393532355A50 (10/1/2022 – 12/31/2025) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: 2 CFR section 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. (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. Control: Per 2 CFR section 200.303(a), a 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 comply 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). Condition: The Department of Labor (Department) charged costs to the program that were issued without documentation of supervisory review and approval. Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Context: For four of sixty general disbursement transactions selected for testing, the Department was unable to provide documentation of supervisory review and approval prior to issuance of payment to the vendor. Cause: The Department’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Internal controls did not prevent or detect the errors. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Questioned costs: None noted. The costs were determined to be allowable. Recommendation: We recommend the Department reviews and enhances its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: The Department acknowledges and accepts this finding.
Reference Number: 2023-008 Prior Year Finding: 2022-017 Federal Agency: U.S. Department of Labor State Agency: Vermont Department of Labor Federal Program: Unemployment Insurance, COVID-19 – Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: UI393532355A50 (10/1/2022 – 12/31/2025) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Control: Per 2 CFR section 200.303(a), a 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 comply 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). Condition: The Department of Labor (Department) charged costs to the federal grant prior to the allowable start of the period of performance. Payments were also issued without review and approval by supervisory staff. Context: Sixty transactions were selected for testing and the following exceptions were noted: • Five of sixty transactions were charged to the award before the allowable period of performance. The grant award start date was October 1, 2022 but costs, totaling $2,277, were incurred in June, July and September 2022. • The Department’s key control is that all payments are supported by an invoice approved by a program manager who is aware of the grant’s period of performance. Four of sixty transactions did not have evidence of supervisory approval prior to issuance of payment. Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Cause: The Department’s procedures and internal controls were not operating sufficiently to ensure that expenditures charged to the program were incurred within the award’s period of performance. Effect: Costs could be deemed unallowable by the awarding agency if funds are expended outside of the allowable period of performance. Questioned costs: Below the reportable limit. Recommendation: The Department should review and enhance its procedures and internal controls to ensure that it charges expenditures to the program that are incurred within an award’s allowable period of performance. Views of responsible officials: The Department acknowledges and accepts this finding.
Reference Number: 2023-008 Prior Year Finding: 2022-017 Federal Agency: U.S. Department of Labor State Agency: Vermont Department of Labor Federal Program: Unemployment Insurance, COVID-19 – Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: UI393532355A50 (10/1/2022 – 12/31/2025) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Control: Per 2 CFR section 200.303(a), a 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 comply 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). Condition: The Department of Labor (Department) charged costs to the federal grant prior to the allowable start of the period of performance. Payments were also issued without review and approval by supervisory staff. Context: Sixty transactions were selected for testing and the following exceptions were noted: • Five of sixty transactions were charged to the award before the allowable period of performance. The grant award start date was October 1, 2022 but costs, totaling $2,277, were incurred in June, July and September 2022. • The Department’s key control is that all payments are supported by an invoice approved by a program manager who is aware of the grant’s period of performance. Four of sixty transactions did not have evidence of supervisory approval prior to issuance of payment. Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Cause: The Department’s procedures and internal controls were not operating sufficiently to ensure that expenditures charged to the program were incurred within the award’s period of performance. Effect: Costs could be deemed unallowable by the awarding agency if funds are expended outside of the allowable period of performance. Questioned costs: Below the reportable limit. Recommendation: The Department should review and enhance its procedures and internal controls to ensure that it charges expenditures to the program that are incurred within an award’s allowable period of performance. Views of responsible officials: The Department acknowledges and accepts this finding.
Reference Number: 2023-013 Prior Year Finding: No Federal Agency: U.S. Department of Education State Agency: Agency of Education Federal Program: Special Education Cluster, COVID-19 – Special Education Cluster Assistance Listing Number: 84.027 and 84.173 Award Number and Year: H027A210098 (7/1/2021 – 9/30/2022), H173A200106 (7/1/2020 – 9/30/2022), H173A210106 (7/1/2021 – 9/30/2022), H027A220098 (7/1/2022 – 9/30/2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: 2 CFR section 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. (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. Control: Per 2 CFR section 200.303(a), a 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 comply 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). Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Condition: Documentation provided to auditors by the Agency of Education (Agency) supporting a subrecipient payment did not agree to the payment made. Context: For six of forty subrecipient payment transactions selected for testing, the Agency did not follow its procedures to verify that supporting documentation provided for reimbursement by the Local Educational Agency (LEA) agreed with the payment requested. Cause: Internal controls were not sufficient to ensure that the Agency followed its established procedures to review and maintain documentation supporting reimbursement requests submitted by LEAs prior to the issuance of payments. Effect: When payment processing procedures are not followed, reimbursement for unallowable or unsupported expenditures could occur. Although the Agency did not follow its procedures at the time of payment, documentation was subsequently provided supporting the payment, and allowability was verified. Questioned costs: None noted. Allowability of the payment amount was verified. Recommendation: We recommend the Agency reviews and enhances its controls regarding subrecipient payment processing to ensure that, prior to issuing reimbursement payments, support provided by LEAs is reviewed for completeness and allowability and that supporting documentation is maintained. Views of responsible officials: Management agrees with the finding.
Reference Number: 2023-013 Prior Year Finding: No Federal Agency: U.S. Department of Education State Agency: Agency of Education Federal Program: Special Education Cluster, COVID-19 – Special Education Cluster Assistance Listing Number: 84.027 and 84.173 Award Number and Year: H027A210098 (7/1/2021 – 9/30/2022), H173A200106 (7/1/2020 – 9/30/2022), H173A210106 (7/1/2021 – 9/30/2022), H027A220098 (7/1/2022 – 9/30/2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: 2 CFR section 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. (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. Control: Per 2 CFR section 200.303(a), a 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 comply 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). Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Condition: Documentation provided to auditors by the Agency of Education (Agency) supporting a subrecipient payment did not agree to the payment made. Context: For six of forty subrecipient payment transactions selected for testing, the Agency did not follow its procedures to verify that supporting documentation provided for reimbursement by the Local Educational Agency (LEA) agreed with the payment requested. Cause: Internal controls were not sufficient to ensure that the Agency followed its established procedures to review and maintain documentation supporting reimbursement requests submitted by LEAs prior to the issuance of payments. Effect: When payment processing procedures are not followed, reimbursement for unallowable or unsupported expenditures could occur. Although the Agency did not follow its procedures at the time of payment, documentation was subsequently provided supporting the payment, and allowability was verified. Questioned costs: None noted. Allowability of the payment amount was verified. Recommendation: We recommend the Agency reviews and enhances its controls regarding subrecipient payment processing to ensure that, prior to issuing reimbursement payments, support provided by LEAs is reviewed for completeness and allowability and that supporting documentation is maintained. Views of responsible officials: Management agrees with the finding.
Reference Number: 2023-013 Prior Year Finding: No Federal Agency: U.S. Department of Education State Agency: Agency of Education Federal Program: Special Education Cluster, COVID-19 – Special Education Cluster Assistance Listing Number: 84.027 and 84.173 Award Number and Year: H027A210098 (7/1/2021 – 9/30/2022), H173A200106 (7/1/2020 – 9/30/2022), H173A210106 (7/1/2021 – 9/30/2022), H027A220098 (7/1/2022 – 9/30/2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: 2 CFR section 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. (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. Control: Per 2 CFR section 200.303(a), a 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 comply 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). Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Condition: Documentation provided to auditors by the Agency of Education (Agency) supporting a subrecipient payment did not agree to the payment made. Context: For six of forty subrecipient payment transactions selected for testing, the Agency did not follow its procedures to verify that supporting documentation provided for reimbursement by the Local Educational Agency (LEA) agreed with the payment requested. Cause: Internal controls were not sufficient to ensure that the Agency followed its established procedures to review and maintain documentation supporting reimbursement requests submitted by LEAs prior to the issuance of payments. Effect: When payment processing procedures are not followed, reimbursement for unallowable or unsupported expenditures could occur. Although the Agency did not follow its procedures at the time of payment, documentation was subsequently provided supporting the payment, and allowability was verified. Questioned costs: None noted. Allowability of the payment amount was verified. Recommendation: We recommend the Agency reviews and enhances its controls regarding subrecipient payment processing to ensure that, prior to issuing reimbursement payments, support provided by LEAs is reviewed for completeness and allowability and that supporting documentation is maintained. Views of responsible officials: Management agrees with the finding.
Reference Number: 2023-013 Prior Year Finding: No Federal Agency: U.S. Department of Education State Agency: Agency of Education Federal Program: Special Education Cluster, COVID-19 – Special Education Cluster Assistance Listing Number: 84.027 and 84.173 Award Number and Year: H027A210098 (7/1/2021 – 9/30/2022), H173A200106 (7/1/2020 – 9/30/2022), H173A210106 (7/1/2021 – 9/30/2022), H027A220098 (7/1/2022 – 9/30/2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: 2 CFR section 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. (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. Control: Per 2 CFR section 200.303(a), a 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 comply 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). Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Condition: Documentation provided to auditors by the Agency of Education (Agency) supporting a subrecipient payment did not agree to the payment made. Context: For six of forty subrecipient payment transactions selected for testing, the Agency did not follow its procedures to verify that supporting documentation provided for reimbursement by the Local Educational Agency (LEA) agreed with the payment requested. Cause: Internal controls were not sufficient to ensure that the Agency followed its established procedures to review and maintain documentation supporting reimbursement requests submitted by LEAs prior to the issuance of payments. Effect: When payment processing procedures are not followed, reimbursement for unallowable or unsupported expenditures could occur. Although the Agency did not follow its procedures at the time of payment, documentation was subsequently provided supporting the payment, and allowability was verified. Questioned costs: None noted. Allowability of the payment amount was verified. Recommendation: We recommend the Agency reviews and enhances its controls regarding subrecipient payment processing to ensure that, prior to issuing reimbursement payments, support provided by LEAs is reviewed for completeness and allowability and that supporting documentation is maintained. Views of responsible officials: Management agrees with the finding.
Reference Number: 2023-015 Prior Year Finding: No Federal Agency: U.S. Department of Education State Agency: Agency of Education Federal Program: Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) Assistance Listing Number: 84.367 Award Number and Year: S367A210043 (7/1/2021 – 9/30/2022), S367A220043 (7/1/2022 – 9/30/2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: 2 CFR section 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. (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. Control: Per 2 CFR section 200.303(a), a 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 comply 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). Condition: Documentation provided to auditors by the Agency of Education (Agency) supporting a subrecipient payment did not agree to the payment made. Section III – Findings and Questioned Costs – Major Federal Programs (Continued) Context: For one of forty subrecipient payment transactions selected for testing, the Agency did not follow its procedures to verify that supporting documentation provided for reimbursement by the Local Educational Agency (LEA) agreed with the payment requested. Cause: Internal controls were not sufficient to ensure that the Agency followed its established procedures to review and maintain documentation supporting reimbursement requests submitted by LEAs prior to the issuance of payments. Effect: When payment processing procedures are not followed, reimbursement for unallowable or unsupported expenditures could occur. Although the Agency did not follow its procedures at the time of payment, documentation was subsequently provided supporting the payment and allowability was verified. Questioned costs: None noted. Allowability of the payment amount was verified. Recommendation: We recommend the Agency reviews and enhances its controls regarding subrecipient payment processing to ensure that, prior to issuing reimbursement payments, support provided by LEAs is reviewed for completeness and allowability and that supporting documentation is maintained. Views of responsible officials: Management agrees with the finding.
Finding Number: 2023-001 – Period of Performance Information on Federal Program: National Endowment for the Humanities ALN: 45.309 ALN Name: Museum Grants for African American History and Culture Context: During testing we identified a 2024 expense in the amount of $24,323 which was inaccurately recorded in fiscal year 2023. Criteria: An entity may charge to the Federal award only allowable costs incurred during the approved budget period of a Federal award’s period of performance (2 CFR sections 200.308, 200.309, and 200.403(h)). Condition: A fiscal year 2024 expense in the amount of $24,323 was inaccurately recorded in fiscal year 2023. Cause: Policies and procedures were not adhered to ensure expenses are recorded in the correct period. Effect or Potential Effect: Expenses of $24,323 were improperly recorded in fiscal year 2023. Questioned Costs: N/A Recommendation: We recommend that the Library ensure its policies and procedures are followed on a consistent basis to ensure the proper recording of expenses in the correct period. Views of Responsible Officials: The Library agrees with the finding. The Library continues to take steps to improve this process. See the Library’s further response to this finding as described in the accompanying management's planned corrective actions, Appendix A.
2023-025 Improve Controls over Manual Journal Entries Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Labor Pass-Through Entity: None AL Numbers and Titles: 17.207 – Employment Service/Wagner-Peyser Funded Activities 17.801 – Jobs for Veterans State Grant Federal Award Numbers: ES387252255A13 (Year: 2022), ES367492155A13 (Year: 2021), ES353382055A13 (Year: 2020), ES333881955A13 (Year: 2019), DV35790SG1 (Year: 2020), DV37869SG2 (Year: 2021) Questioned Costs: $1,220,638 Description: The Georgia Department of Labor should improve internal controls over manual journal entries for the Employment Services Cluster. Background Information: The Georgia Department of Labor (DOL) is responsible for the administration and monitoring of Georgia's Employment Services Cluster programs, including carrying out the Employment Services/Wagner-Peyser (ES) funded activities, as well as the Jobs for Veterans State Grant (JVSG) funded activities. The main purpose of the ES program is to improve the functioning of the nation’s labor markets by bringing together individuals seeking employment and employers seeking workers. The main purpose of the JVSG program is to provide career services to meet the employment needs of eligible veterans, to conduct outreach to employers in the area to assist veterans in gaining employment, and to facilitate employment, training, and placement services furnished to veterans. Operation of the Employment Services Cluster programs transferred to the Technical College System of Georgia (TCSG) in January 2023. Criteria: As a recipient of federal awards, the DOL is required to establish and maintain effective internal controls over federal awards that provide reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.402 state, that “the total cost of a federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits.” In addition, provisions included in the Uniform Guidance, Section 200.403(g) state, in part, that costs must “be adequately documented.” Condition: Our audit of the Employment Services Cluster revealed deficiencies related to manual journal entries (MJE) booked to re-rate program expenditures. Auditors identified a population of 70 MJE’s and selected a total of 11 items for testing. Of those 11 MJE’s one item was an individually selected item (ISI) and an additional 10 were randomly selected using a non-statistical sampling method. Auditors found that the one ISI and two of the randomly selected MJEs were for unallowable expenditures given they were charged to the program well after the authority to carry out program activities was transferred to TCSG. Additionally, the one ISI and seven randomly selected MJEs did not have adequate documentation to support the allowability of costs being charged to the program. Questioned Costs: Upon testing a sample of $603,291 of MJE’s, known questioned costs of $383,294 were identified. Using the total population amount of $2,635,054, we project likely questioned costs to be approximately $1,674,153. In addition, known questioned costs identified for the ISI tested totaled $837,344; therefore, the known questioned costs identified for MJE’s throughout the sample and ISI tested totaled $1,220,638. Cause: The Employment Services Cluster moved to TCSG in January 2023, which had already been a delay in transfer to TCSG as it should have been as of July 1, 2022. Based on the actual transfer of the program in January 2023 DOL completed final ETA-9130 reports for the grants transferring to TCSG, which were to be submitted by February 14, 2023. The reports submitted to the U.S. Department of Labor’s Employment and Training Administration by the DOL included expenditures (the three MJE’s noted in the condition section above) that were not incurred until after the programs and program staff had moved to the TCSG and after the actual reports were submitted. Additionally, the existing internal control system in place did not provide adequate documentation to be maintained or provided for the eight additional MJEs identified as unsupported in our testing. Effect: The inclusion of unallowable costs in program expenditures and not maintaining adequate documentation of manual journal entries resulted in noncompliance with federal regulations and the Uniform Guidance. In addition, without effective controls, the DOL increases its risk of charging unallowable costs to federal programs. This may prevent the DOL from effectively administering federal programs in the future. Furthermore, the U.S. Department of Labor may require repayment of costs that are determined to be unallowable, and the State of Georgia could be responsible for such repayment. Recommendation: The DOL should ensure that all current and future business practices follow the established policies and procedures of the Uniform Guidance, the U.S. Department of Labor, and the State of Georgia. Where vulnerable, the DOL should modify its policies and procedures to ensure that costs being charged via manual journal entries are allowable and adequately documented, including original invoices for costs being moved to other federal programs. Furthermore, management should develop and implement a monitoring process to ensure that controls are operating appropriately. Views of Responsible Officials: We concur with this finding.
2023-025 Improve Controls over Manual Journal Entries Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Labor Pass-Through Entity: None AL Numbers and Titles: 17.207 – Employment Service/Wagner-Peyser Funded Activities 17.801 – Jobs for Veterans State Grant Federal Award Numbers: ES387252255A13 (Year: 2022), ES367492155A13 (Year: 2021), ES353382055A13 (Year: 2020), ES333881955A13 (Year: 2019), DV35790SG1 (Year: 2020), DV37869SG2 (Year: 2021) Questioned Costs: $1,220,638 Description: The Georgia Department of Labor should improve internal controls over manual journal entries for the Employment Services Cluster. Background Information: The Georgia Department of Labor (DOL) is responsible for the administration and monitoring of Georgia's Employment Services Cluster programs, including carrying out the Employment Services/Wagner-Peyser (ES) funded activities, as well as the Jobs for Veterans State Grant (JVSG) funded activities. The main purpose of the ES program is to improve the functioning of the nation’s labor markets by bringing together individuals seeking employment and employers seeking workers. The main purpose of the JVSG program is to provide career services to meet the employment needs of eligible veterans, to conduct outreach to employers in the area to assist veterans in gaining employment, and to facilitate employment, training, and placement services furnished to veterans. Operation of the Employment Services Cluster programs transferred to the Technical College System of Georgia (TCSG) in January 2023. Criteria: As a recipient of federal awards, the DOL is required to establish and maintain effective internal controls over federal awards that provide reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.402 state, that “the total cost of a federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits.” In addition, provisions included in the Uniform Guidance, Section 200.403(g) state, in part, that costs must “be adequately documented.” Condition: Our audit of the Employment Services Cluster revealed deficiencies related to manual journal entries (MJE) booked to re-rate program expenditures. Auditors identified a population of 70 MJE’s and selected a total of 11 items for testing. Of those 11 MJE’s one item was an individually selected item (ISI) and an additional 10 were randomly selected using a non-statistical sampling method. Auditors found that the one ISI and two of the randomly selected MJEs were for unallowable expenditures given they were charged to the program well after the authority to carry out program activities was transferred to TCSG. Additionally, the one ISI and seven randomly selected MJEs did not have adequate documentation to support the allowability of costs being charged to the program. Questioned Costs: Upon testing a sample of $603,291 of MJE’s, known questioned costs of $383,294 were identified. Using the total population amount of $2,635,054, we project likely questioned costs to be approximately $1,674,153. In addition, known questioned costs identified for the ISI tested totaled $837,344; therefore, the known questioned costs identified for MJE’s throughout the sample and ISI tested totaled $1,220,638. Cause: The Employment Services Cluster moved to TCSG in January 2023, which had already been a delay in transfer to TCSG as it should have been as of July 1, 2022. Based on the actual transfer of the program in January 2023 DOL completed final ETA-9130 reports for the grants transferring to TCSG, which were to be submitted by February 14, 2023. The reports submitted to the U.S. Department of Labor’s Employment and Training Administration by the DOL included expenditures (the three MJE’s noted in the condition section above) that were not incurred until after the programs and program staff had moved to the TCSG and after the actual reports were submitted. Additionally, the existing internal control system in place did not provide adequate documentation to be maintained or provided for the eight additional MJEs identified as unsupported in our testing. Effect: The inclusion of unallowable costs in program expenditures and not maintaining adequate documentation of manual journal entries resulted in noncompliance with federal regulations and the Uniform Guidance. In addition, without effective controls, the DOL increases its risk of charging unallowable costs to federal programs. This may prevent the DOL from effectively administering federal programs in the future. Furthermore, the U.S. Department of Labor may require repayment of costs that are determined to be unallowable, and the State of Georgia could be responsible for such repayment. Recommendation: The DOL should ensure that all current and future business practices follow the established policies and procedures of the Uniform Guidance, the U.S. Department of Labor, and the State of Georgia. Where vulnerable, the DOL should modify its policies and procedures to ensure that costs being charged via manual journal entries are allowable and adequately documented, including original invoices for costs being moved to other federal programs. Furthermore, management should develop and implement a monitoring process to ensure that controls are operating appropriately. Views of Responsible Officials: We concur with this finding.
2023-021 Improve Controls over Period of Performance Compliance Requirement: Period of Performance Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Health and Human Services Pass-Through Entity: None AL Number and Title: 93.958 – Block Grants for Community Mental Health Federal Award Number: B09SM083833 (Year: 2021) Questioned Costs: $1,996,195.46 Repeat of Prior Year Finding: 2022-024 Description: The Georgia Department of Behavioral Health and Developmental Disabilities should improve internal controls to ensure that program costs are obligated within the period of performance and liquidated within the allowed time period. Background Information: The Community Mental Health Services Block Grant (MHBG) program was created to provide funds to states and territories to enable them to carry out their respective plans for providing comprehensive community-based mental health services for adults with serious mental illness and children with serious emotional disturbances. MHBG program funds are allocated to individual states based upon a formula. This funding may be distributed to cities, counties, or service providers within each state to carry out activities associated with the state plan. Funds associated with the MHBG program are administered by the Department of Behavioral Health and Developmental Disabilities (DBHDD). The DBHDD is responsible for becoming familiar with the performance period during which recipients must obligate and liquidate costs for this program. These periods typically align with the federal fiscal year of October 1 through September 30, and payments for costs incurred before a grant award’s beginning date or after the liquidation period are not allowed without the grantor’s prior approval. Criteria: As a recipient of federal awards, the DBHDD is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented, (h) Cost must be incurred during the approved budget period…” Additionally, provisions included in the Uniform Guidance, Section 200.77 state, “Period of performance means the time during which the non-Federal entity may incur new obligations to carry out the work authorized under the Federal award.” Further, the DBHDD’s policies 17-202 – Federal Fund Source and Parent Project Code Assignments and 17-203 – Federal Financial Report Preparation, Reconciliation, and Submission prescribe actions that must be taken by staff to ensure that costs are obligated, incurred, and liquidated within the appropriate period as specified in each grant award’s terms and conditions. Condition: Our audit of the MHBG program included a review of adjustments with performance period ending dates during the audit period to ensure that the amounts were obligated and liquidated within the appropriate time period. Two adjustments were identified as the population, and both were selected for testing. It was noted that both of these transactions were not liquidated within 90 days of the end of the period of performance as required. Additionally, these adjustments were not identified by the DBHDD and reclassified to an appropriate, subsequent award number as is reflected within the DBHDD’s internal policy. Questioned Costs: Known questioned costs of $1,996,195.46 related to the MHBG program were identified for expenditures that were paid outside of the allowable liquidation period. These known questioned costs related to expenditures were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: While the DBHDD had established procedures in place to comply with the period of performance requirements for federal awards, human error and a lack of appropriate oversight contributed to the errors identified by auditors. Also, the DBHDD policy governing period of performance does not address the correction of errors in a timely manner as the policy only recommends that corrections be completed during the close-out process for the grant award. Effect: The deficiencies noted in the period of performance process resulted in noncompliance with federal regulations. Without effective controls in place to ensure compliance with federal period of performance requirements, the DBHDD is at a higher risk of making improper payments and performing inaccurate financial reporting. Recommendation: We recommend that the DBHDD: • Update policy, processes, and procedures associated with period of performance requirements to recommend corrections be made in a timely manner. • Follow currently established grant close-out processes and procedures associated with period of performance requirements. • Incorporate additional oversight, training, and/or staff to aid in the identification of the period of performance to ensure costs are associated with the correct fund source. Views of Responsible Officials: DBHDD concurs with the audit finding.
2023-022 Improve Controls over Period of Performance Compliance Requirement: Period of Performance Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Health and Human Services Pass-Through Entity: None AL Number and Title: 93.959 – Block Grants for Prevention and Treatment of Substance Abuse Federal Award Numbers: B08TI085799 (Year: 2023), 1B08TI083442-01 (Year: 2021) Questioned Costs: $221,131.74 Description: The Georgia Department of Behavioral Health and Developmental Disabilities should improve internal controls to ensure that program costs are obligated within the period of performance and liquidated within the allowed time period. Background Information: The objective of the Substance Abuse Prevention and Treatment Block Grant (SABG) program is to provide funds to states, territories, and one Indian tribe for the purpose of planning, carrying out, and evaluating activities to prevent and treat Substance Abuse (SA) and other related activities as authorized by the statute. Funds associated with the SABG program are administered by the Department of Behavioral Health and Developmental Disabilities (DBHDD). The DBHDD is responsible for becoming familiar with the performance period during which recipients must obligate and liquidate costs for this program. These periods typically align with the federal fiscal year of October 1 through September 30, and payments for costs incurred before a grant award’s beginning date or after the liquidation period are not allowed without the grantor’s prior approval. Criteria: As a recipient of federal awards, the DBHDD is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented, (h) Cost must be incurred during the approved budget period…” Additionally, provisions included in the Uniform Guidance, Section 200.77 state, “Period of performance means the time during which the non-Federal entity may incur new obligations to carry out the work authorized under the Federal award.” Further, the DBHDD’s policies 17-202 – Federal Fund Source and Parent Project Code Assignments and 17-203 – Federal Financial Report Preparation, Reconciliation, and Submission prescribe actions that must be taken by staff to ensure that costs are obligated, incurred, and liquidated within the appropriate period as specified in each grant award’s terms and conditions. Condition: Our audit of the SABG program included a review of expenditures with performance period beginning dates during the audit period to ensure that costs were not incurred before the allowable time period. Six expenditures were identified as the population and were all selected for testing. It was noted that three expenditures reviewed were incurred before the period of performance. In addition, our audit of the SABG program included a review of adjustments with a performance period ending date during the audit period. One adjustment was identified as the population and tested to ensure that the amounts were obligated and liquidated within the appropriate time period. It was noted that this transaction was not posted within 90 days of the end of the period of performance as required. Additionally, this expenditure was not identified by the DBHDD and reclassified to an appropriate, subsequent award number as is reflected within the DBHDD’s internal policy. Questioned Costs: Known questioned costs of $221,131.74 related to the SABG program were identified for expenditures that were incurred before the period of performance or paid outside of the allowable liquidation period. These known questioned costs related to expenditures were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: While the DBHDD had established procedures in place to comply with the period of performance requirements for federal awards, human error and a lack of appropriate oversight contributed to the errors identified by auditors. Also, the DBHDD policy governing period of performance does not address the correction of errors in a timely manner as the policy only recommends that corrections be completed during the close-out process for the grant award. Effect: The deficiencies noted in the period of performance process resulted in noncompliance with federal regulations. Without effective controls in place to ensure compliance with federal period of performance requirements, the DBHDD is at a higher risk of making improper payments and performing inaccurate financial reporting. Recommendation: We recommend that the DBHDD: • Update policy, processes, and procedures associated with period of performance requirements to recommend corrections be made in a timely manner. • Follow currently established grant close-out processes and procedures associated with period of performance requirements. • Incorporate additional oversight, training, and/or staff to aid in the identification of the period of performance to ensure costs are associated with the correct fund source. Views of Responsible Officials: DBHDD concurs with the audit finding.
FINDING 2023-004 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 Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 22, FY 23 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding for Allowable Costs/Cost Principles from the prior audit report. The prior audit finding number was 2021-002. Condition and Context Reimbursement for meals served is not based on costs; it is determined solely by applying the applicable meals times rates formula. A School Corporation can use its entire reimbursement payment for any combination of allowable operating and administrative costs. Therefore, expenditures charged to the food service program fund (fund 800) are to be for the benefit of the food service program and in conformance with applicable cost principles. Forty vendor claims were selected for testing to ensure the identified internal control of one employee prepares the claim and a second knowledgeable individual reviews the claim prior to payment was in place and operating effectively. For two of the forty vendor claims tested, one employee prepared and approved the claim without a review or oversight process by a second knowledgeable employee. In addition, one of the two claims was approved without supporting documentation. An additional forty claims were selected to ensure the expenditures were for the benefit of the food service program. For the forty claims tested, the following issues were noted: Seven claims, as detailed below, were for unallowable activities and unallowable costs. One claim was for the purchase of gift cards for staff gifts totaling $905. INDIANA STATE BOARD OF ACCOUNTS 25 METROPOLITAN SCHOOL DISTRICT OF SOUTHWEST ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Two claims were refunds of prepaid lunch account balances totaling $1,790. Two claims were reimbursements to an employee for staff breakfasts totaling $110. One claim was for the purchase of medication totaling $8. One claim was for the purchase of uniforms totaling $50, which included no supporting documentation for the purchase. Eight claims included the payment of sales tax totaling $85. Due to the noncompliance identified above, an additional twenty-one claims paid to one employee were judgmentally selected for testing. For the additional twenty-one claims tested, the following errors were noted: One claim was for the purchase of a back brace shipped to an employee's house totaling $31. Twelve claims included the payment of sales tax totaling $195. In addition, all refunds not already selected for testing were reviewed. A total of sixty-seven additional refunds of prepaid lunch account balances were identified and determined to be incorrectly made from Fund 800. The total amount of the additional refunds was $6,476. The total amount of unallowed activities and unallowable costs charged to the School Lunch fund was $9,650. This amount was considered questioned costs. The lack of effective 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 220.7(e)(1) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." INDIANA STATE BOARD OF ACCOUNTS 26 METROPOLITAN SCHOOL DISTRICT OF SOUTHWEST ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . ." 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. . . ." Cause A proper system of internal controls, which would include segregation of key functions, was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, costs that were not necessary and reasonable for the performance of the federal award were paid for with federal funds. 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 funding to the School Corporation. Questioned Costs Known questioned costs of $9,650 were identified as detailed in the Condition and Context. Recommendation We recommended the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are for the benefit of the food service program and are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 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 Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 22, FY 23 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding for Allowable Costs/Cost Principles from the prior audit report. The prior audit finding number was 2021-002. Condition and Context Reimbursement for meals served is not based on costs; it is determined solely by applying the applicable meals times rates formula. A School Corporation can use its entire reimbursement payment for any combination of allowable operating and administrative costs. Therefore, expenditures charged to the food service program fund (fund 800) are to be for the benefit of the food service program and in conformance with applicable cost principles. Forty vendor claims were selected for testing to ensure the identified internal control of one employee prepares the claim and a second knowledgeable individual reviews the claim prior to payment was in place and operating effectively. For two of the forty vendor claims tested, one employee prepared and approved the claim without a review or oversight process by a second knowledgeable employee. In addition, one of the two claims was approved without supporting documentation. An additional forty claims were selected to ensure the expenditures were for the benefit of the food service program. For the forty claims tested, the following issues were noted: Seven claims, as detailed below, were for unallowable activities and unallowable costs. One claim was for the purchase of gift cards for staff gifts totaling $905. INDIANA STATE BOARD OF ACCOUNTS 25 METROPOLITAN SCHOOL DISTRICT OF SOUTHWEST ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Two claims were refunds of prepaid lunch account balances totaling $1,790. Two claims were reimbursements to an employee for staff breakfasts totaling $110. One claim was for the purchase of medication totaling $8. One claim was for the purchase of uniforms totaling $50, which included no supporting documentation for the purchase. Eight claims included the payment of sales tax totaling $85. Due to the noncompliance identified above, an additional twenty-one claims paid to one employee were judgmentally selected for testing. For the additional twenty-one claims tested, the following errors were noted: One claim was for the purchase of a back brace shipped to an employee's house totaling $31. Twelve claims included the payment of sales tax totaling $195. In addition, all refunds not already selected for testing were reviewed. A total of sixty-seven additional refunds of prepaid lunch account balances were identified and determined to be incorrectly made from Fund 800. The total amount of the additional refunds was $6,476. The total amount of unallowed activities and unallowable costs charged to the School Lunch fund was $9,650. This amount was considered questioned costs. The lack of effective 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 220.7(e)(1) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." INDIANA STATE BOARD OF ACCOUNTS 26 METROPOLITAN SCHOOL DISTRICT OF SOUTHWEST ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . ." 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. . . ." Cause A proper system of internal controls, which would include segregation of key functions, was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, costs that were not necessary and reasonable for the performance of the federal award were paid for with federal funds. 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 funding to the School Corporation. Questioned Costs Known questioned costs of $9,650 were identified as detailed in the Condition and Context. Recommendation We recommended the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are for the benefit of the food service program and are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 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 Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 22, FY 23 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding for Allowable Costs/Cost Principles from the prior audit report. The prior audit finding number was 2021-002. Condition and Context Reimbursement for meals served is not based on costs; it is determined solely by applying the applicable meals times rates formula. A School Corporation can use its entire reimbursement payment for any combination of allowable operating and administrative costs. Therefore, expenditures charged to the food service program fund (fund 800) are to be for the benefit of the food service program and in conformance with applicable cost principles. Forty vendor claims were selected for testing to ensure the identified internal control of one employee prepares the claim and a second knowledgeable individual reviews the claim prior to payment was in place and operating effectively. For two of the forty vendor claims tested, one employee prepared and approved the claim without a review or oversight process by a second knowledgeable employee. In addition, one of the two claims was approved without supporting documentation. An additional forty claims were selected to ensure the expenditures were for the benefit of the food service program. For the forty claims tested, the following issues were noted: Seven claims, as detailed below, were for unallowable activities and unallowable costs. One claim was for the purchase of gift cards for staff gifts totaling $905. INDIANA STATE BOARD OF ACCOUNTS 25 METROPOLITAN SCHOOL DISTRICT OF SOUTHWEST ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Two claims were refunds of prepaid lunch account balances totaling $1,790. Two claims were reimbursements to an employee for staff breakfasts totaling $110. One claim was for the purchase of medication totaling $8. One claim was for the purchase of uniforms totaling $50, which included no supporting documentation for the purchase. Eight claims included the payment of sales tax totaling $85. Due to the noncompliance identified above, an additional twenty-one claims paid to one employee were judgmentally selected for testing. For the additional twenty-one claims tested, the following errors were noted: One claim was for the purchase of a back brace shipped to an employee's house totaling $31. Twelve claims included the payment of sales tax totaling $195. In addition, all refunds not already selected for testing were reviewed. A total of sixty-seven additional refunds of prepaid lunch account balances were identified and determined to be incorrectly made from Fund 800. The total amount of the additional refunds was $6,476. The total amount of unallowed activities and unallowable costs charged to the School Lunch fund was $9,650. This amount was considered questioned costs. The lack of effective 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 220.7(e)(1) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." INDIANA STATE BOARD OF ACCOUNTS 26 METROPOLITAN SCHOOL DISTRICT OF SOUTHWEST ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . ." 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. . . ." Cause A proper system of internal controls, which would include segregation of key functions, was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, costs that were not necessary and reasonable for the performance of the federal award were paid for with federal funds. 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 funding to the School Corporation. Questioned Costs Known questioned costs of $9,650 were identified as detailed in the Condition and Context. Recommendation We recommended the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are for the benefit of the food service program and are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 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 Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 22, FY 23 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding for Allowable Costs/Cost Principles from the prior audit report. The prior audit finding number was 2021-002. Condition and Context Reimbursement for meals served is not based on costs; it is determined solely by applying the applicable meals times rates formula. A School Corporation can use its entire reimbursement payment for any combination of allowable operating and administrative costs. Therefore, expenditures charged to the food service program fund (fund 800) are to be for the benefit of the food service program and in conformance with applicable cost principles. Forty vendor claims were selected for testing to ensure the identified internal control of one employee prepares the claim and a second knowledgeable individual reviews the claim prior to payment was in place and operating effectively. For two of the forty vendor claims tested, one employee prepared and approved the claim without a review or oversight process by a second knowledgeable employee. In addition, one of the two claims was approved without supporting documentation. An additional forty claims were selected to ensure the expenditures were for the benefit of the food service program. For the forty claims tested, the following issues were noted: Seven claims, as detailed below, were for unallowable activities and unallowable costs. One claim was for the purchase of gift cards for staff gifts totaling $905. INDIANA STATE BOARD OF ACCOUNTS 25 METROPOLITAN SCHOOL DISTRICT OF SOUTHWEST ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Two claims were refunds of prepaid lunch account balances totaling $1,790. Two claims were reimbursements to an employee for staff breakfasts totaling $110. One claim was for the purchase of medication totaling $8. One claim was for the purchase of uniforms totaling $50, which included no supporting documentation for the purchase. Eight claims included the payment of sales tax totaling $85. Due to the noncompliance identified above, an additional twenty-one claims paid to one employee were judgmentally selected for testing. For the additional twenty-one claims tested, the following errors were noted: One claim was for the purchase of a back brace shipped to an employee's house totaling $31. Twelve claims included the payment of sales tax totaling $195. In addition, all refunds not already selected for testing were reviewed. A total of sixty-seven additional refunds of prepaid lunch account balances were identified and determined to be incorrectly made from Fund 800. The total amount of the additional refunds was $6,476. The total amount of unallowed activities and unallowable costs charged to the School Lunch fund was $9,650. This amount was considered questioned costs. The lack of effective 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 220.7(e)(1) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." INDIANA STATE BOARD OF ACCOUNTS 26 METROPOLITAN SCHOOL DISTRICT OF SOUTHWEST ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . ." 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. . . ." Cause A proper system of internal controls, which would include segregation of key functions, was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, costs that were not necessary and reasonable for the performance of the federal award were paid for with federal funds. 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 funding to the School Corporation. Questioned Costs Known questioned costs of $9,650 were identified as detailed in the Condition and Context. Recommendation We recommended the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are for the benefit of the food service program and are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 20611-158-PN01, 20619-158-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation was a member of the Clark County Joint Services Program (Cooperative). During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the federal money on behalf of all its member school corporations. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school corporation, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. 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 corporation. 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 all grant awards were not expended as required by the IDOE for the individual member school corporation. The Cooperative categorized each expenditure by location, and the total amount did not meet or exceed the required proportionate share as outlined on the award letter. The Cooperative was required to spend a total of $59,633 for 20611-158-PN01 and $35,470 for 20619-158-PN01. $32,798 was identified as being spent for 20611-158-PN01, which was less than the required proportionate share. The Cooperative was unable to provide documentation to identify the expenditures spent for 20619-158-PN01. The lack of internal controls and noncompliance were isolated to fiscal year 2021-2022 and the 20611-158-PN01 and the 20619-158-PN01 grant awards. INDIANA STATE BOARD OF ACCOUNTS 18 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 document. . . ." 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 the 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 A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the total required Non-Public Proportionate Share was not spent for one grant and the expenditures for another grant could not be determined. 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 funding to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 19 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 Non-Public Proportionate Share amounts are spent as identified within the application and all documentation is retained to determine so that expenditures can be appropriately identified. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 20611-158-PN01, 20619-158-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation was a member of the Clark County Joint Services Program (Cooperative). During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the federal money on behalf of all its member school corporations. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school corporation, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. 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 corporation. 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 all grant awards were not expended as required by the IDOE for the individual member school corporation. The Cooperative categorized each expenditure by location, and the total amount did not meet or exceed the required proportionate share as outlined on the award letter. The Cooperative was required to spend a total of $59,633 for 20611-158-PN01 and $35,470 for 20619-158-PN01. $32,798 was identified as being spent for 20611-158-PN01, which was less than the required proportionate share. The Cooperative was unable to provide documentation to identify the expenditures spent for 20619-158-PN01. The lack of internal controls and noncompliance were isolated to fiscal year 2021-2022 and the 20611-158-PN01 and the 20619-158-PN01 grant awards. INDIANA STATE BOARD OF ACCOUNTS 18 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 document. . . ." 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 the 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 A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the total required Non-Public Proportionate Share was not spent for one grant and the expenditures for another grant could not be determined. 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 funding to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 19 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 Non-Public Proportionate Share amounts are spent as identified within the application and all documentation is retained to determine so that expenditures can be appropriately identified. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-158-PN01, 19619-158-PN01, 20611-158-PN01, 20619-158-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation was a member of the Clark County Joint Services Program (Cooperative). During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the federal money on behalf of all its member school corporations. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school corporation, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation to ensure compliance with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. The Cooperative did not have internal controls in place over payroll transactions to ensure expenditures were allowed and in conformance with the cost principles. The Treasurer reviewed a report which showed the total amount paid from each fund and account; however, a detailed payroll report was not reviewed which would have identified the employee being paid from the grant fund. For vendor disbursements, although the Deputy Treasurer matched the invoice to the purchase order and provided it to the Corporation Treasurer for review and signature of the Accounts Payable Voucher (claim) prior to payment, the internal control was not effective and did not detect or allow correction of errors. In the initial sample of 6 vendor disbursements, one claim was unable to be provided. As the error was isolated to vendor disbursements, the sample of vendor disbursements only was increased by 31. Within the new sample of 31 vendor disbursements, an additional claim was unable to be provided. As both vendor disbursements with missing documentation were travel expense reimbursements made to the same employee, the ledger was reviewed for additional travel disbursements to that individual. None were identified; thus, no further testing was determined to be necessary. INDIANA STATE BOARD OF ACCOUNTS 20 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls over payroll disbursements was isolated to 2021-2022. The ineffective internal controls and noncompliance over vendor disbursements were isolated to the two travel claims noted above. 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 200.334 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. . . ." 34 CFR 300.202(a) states: "General. Amounts provided to the LEA under Part B of the Act - (1) Must be expended in accordance with the applicable provisions of this part; (2) Must be used only to pay the excess costs of providing special education and related services to children with disabilities, consistent with paragraph (b) of this section; and (3) Must be used to supplement State, local, and other Federal funds and not to supplant those funds." 34 CFR 300.208 states: "(a) Uses. Notwithstanding §§ 300.202, 300.203(b), and 300.162(b), funds provided to an LEA under Part B of the Act may be used for the following activities: (1) Services and aids that also benefit nondisabled children. For the costs of special education and related services, and supplementary aids and services, provided in a regular class or other education-related setting to a child with a disability in accordance with the IEP of the child, even if one or more nondisabled children benefit from these services. (2) Early intervening services. To develop and implement coordinated, early intervening educational services in accordance with § 300.226. INDIANA STATE BOARD OF ACCOUNTS 21 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (3) High cost special education and related services. To establish and implement cost or risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in a consortium of which the LEA is a part, to pay for high cost special education and related services. (b) Administrative case management. An LEA may use funds received under Part B of the Act to purchase appropriate technology for recordkeeping, data collection, and related case management activities of teachers and related services personnel providing services described in the IEP of children with disabilities, that is needed for the implementation of those case management activities." 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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, appropriate documentation for two travel claims was not retained. 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 funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure that documentation will be maintained and made available for audit. INDIANA STATE BOARD OF ACCOUNTS 22 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 19611-158-PN01, 19619-158-PN01, 20611-158-PN01, 20619-158-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation was a member of the Clark County Joint Services Program (Cooperative). During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the federal money on behalf of all its member school corporations. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school corporation, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation to ensure compliance with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. The Cooperative did not have internal controls in place over payroll transactions to ensure expenditures were allowed and in conformance with the cost principles. The Treasurer reviewed a report which showed the total amount paid from each fund and account; however, a detailed payroll report was not reviewed which would have identified the employee being paid from the grant fund. For vendor disbursements, although the Deputy Treasurer matched the invoice to the purchase order and provided it to the Corporation Treasurer for review and signature of the Accounts Payable Voucher (claim) prior to payment, the internal control was not effective and did not detect or allow correction of errors. In the initial sample of 6 vendor disbursements, one claim was unable to be provided. As the error was isolated to vendor disbursements, the sample of vendor disbursements only was increased by 31. Within the new sample of 31 vendor disbursements, an additional claim was unable to be provided. As both vendor disbursements with missing documentation were travel expense reimbursements made to the same employee, the ledger was reviewed for additional travel disbursements to that individual. None were identified; thus, no further testing was determined to be necessary. INDIANA STATE BOARD OF ACCOUNTS 20 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls over payroll disbursements was isolated to 2021-2022. The ineffective internal controls and noncompliance over vendor disbursements were isolated to the two travel claims noted above. 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 200.334 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. . . ." 34 CFR 300.202(a) states: "General. Amounts provided to the LEA under Part B of the Act - (1) Must be expended in accordance with the applicable provisions of this part; (2) Must be used only to pay the excess costs of providing special education and related services to children with disabilities, consistent with paragraph (b) of this section; and (3) Must be used to supplement State, local, and other Federal funds and not to supplant those funds." 34 CFR 300.208 states: "(a) Uses. Notwithstanding §§ 300.202, 300.203(b), and 300.162(b), funds provided to an LEA under Part B of the Act may be used for the following activities: (1) Services and aids that also benefit nondisabled children. For the costs of special education and related services, and supplementary aids and services, provided in a regular class or other education-related setting to a child with a disability in accordance with the IEP of the child, even if one or more nondisabled children benefit from these services. (2) Early intervening services. To develop and implement coordinated, early intervening educational services in accordance with § 300.226. INDIANA STATE BOARD OF ACCOUNTS 21 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (3) High cost special education and related services. To establish and implement cost or risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in a consortium of which the LEA is a part, to pay for high cost special education and related services. (b) Administrative case management. An LEA may use funds received under Part B of the Act to purchase appropriate technology for recordkeeping, data collection, and related case management activities of teachers and related services personnel providing services described in the IEP of children with disabilities, that is needed for the implementation of those case management activities." 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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, appropriate documentation for two travel claims was not retained. 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 funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure that documentation will be maintained and made available for audit. INDIANA STATE BOARD OF ACCOUNTS 22 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding Number: 2023-006 State/Educational Agency(s): Arkansas Department of Commerce – Arkansas Economic Development Commission Pass-Through Entity: Not Applicable AL Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) Federal Awarding Agency: U.S. Department of Treasury Federal Award Number(s): SLFRP3627 Federal Award Year(s): 2022 Compliance Requirement(s) Affected: Activities Allowed or Unallowed; Allowable Costs/Cost Principles Type of Finding: Noncompliance and Material Weakness Repeat Finding: A similar issue was reported in prior-year finding 2022-014. Criteria: In accordance with 2 CFR § 200.403(g), costs must be adequately documented to be allowable under federal awards. In addition, state-promulgated rules governing the Arkansas Rural Connect (ARC) Program provide that internet service providers (ISPs) must submit receipts for all reimbursable expenses. The rules also provide that the full purchase price of capital equipment used for the build phase of a project and having value for other construction work subsequent to project completion, is not allowable. Finally, 2 CFR § 200.303 states that a 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 award. • Evaluate and monitor its compliance with the award. • Take prompt action when instances of noncompliance are identified, including noncompliance identified in audit findings. Condition and Context: ALA staff selected 20 payments made to ISPs to determine if sufficient, appropriate documentation was maintained to support that reimbursements were made for allowable project expenses. ALA review revealed the following: Project 1: • Two claims, totaling $3,465, were reimbursed without appropriate supporting documentation (e.g., an invoice or receipt). Project 2: • Two claims, totaling $5,179, were reimbursed without appropriate supporting documentation (e.g., an invoice or receipt). • The Agency’s contractor, UAMS-IDHI, approved reimbursement for a “fiber splicing trailer,” also referred to as a tandem axle enclosed trailer, totaling $25,673. This item is commonly used by broadband installers and has value for other non-ARC constructions projects, making it unallowable. Project 3: • Nine claims, totaling $92,538, were reimbursed without appropriate supporting documentation (e.g., an invoice or receipt). • Eight claims, totaling $498,487, were reimbursed without appropriate supporting documentation (e.g., an invoice or receipt). Statistically Valid Sample: Not a statistically valid sample Questioned Costs: $625,342 Cause: The Agency’s contractor, UAMS-IDHI, did not perform its obligation to ensure reimbursement requests were appropriately supported. The contractor stated that it relaxed the review process as a result of an internal agreement with the previous Commission Director of Broadband. Effect: Reimbursements were approved for expenditures that may not have been allowable or may not have been incurred. The federal awarding agency may require recoupment. Recommendation: ALA staff recommend the Agency promptly develop, document, and establish procedures to monitor the agreement with its contractor to ensure completion of performance objectives and compliance with federal regulations. Views of Responsible Officials and Planned Corrective Action: ASBO has entered a contract with a new 3rd party administrator to provide oversight for all subgrant awardees. This contact is active now. We developed our contract to ensure improved monitoring for expenditures and verification of receipts. Also, we are in the process of developing a portal which will allow this contractor and ASBO to have full access to all documents from subgrantees. Our new vendor does have prior experience with subgrants management. In addition, ASBO commits internally to the following: • We will monitor all capital purchases when the invoices are received at our office. • We will pull a random sample of five invoices per month and conduct our own review of expenses. Highlights for the Baker contract: ASBO’s broadband grant program management vendor-partner, Michael Baker International (MBI), is contracted for the following activities and deliverables: • Developing the workflow, process, and online forms that facilitate project monitoring and expense reimbursement. • Responsible for pursuing and documenting additional information required for project monitoring and reimbursement activities. These activities shall be completed within the framework of the Broadband Grants Project Monitoring and Reimbursement System (see below for details) and not through external email or other document exchange system. • Develop and apply standardized naming conventions for all project documents that will be maintained throughout the life of the project. Documents shall be stored in a manner that promotes transparency and facilities ease of use by auditors. • Take all reasonable measures to ensure grant activities are implemented in a manner that ensures transparency, accountability, and oversight sufficient to (1) minimize the opportunity for waste, fraud, and abuse; (2) ensure that subrecipients use funds to further the objectives of Federal programs and the Arkansas State Broadband Office; and (3) allow the public to understand and monitor subgrants awarded under the program. • Ensuring all reimbursement activity complies with Federal requirements, including Section 60102 of the Infrastructure Act, 2 C.F.R. Part 200 and any supplemental guidance issued by the Federal government. • Responsible for knowing what constitutes eligible and ineligible expenses under both state and Federal rules. • Provide education and guidance to subrecipients and the ASBO on key oversight and compliance requirements. • Ensure payment activities follow all state and Federal policies and procedures. Contractor acknowledges policies may change over the life of the contract. • Identify policies the ASBO is required to adopt and assist in drafting those policies to ensure ASBO compliance with Federal regulations. • Assist the Arkansas State Broadband Office in enforcing program rules and laws and imposing penalties for nonperformance, failure to meet statutory obligations, or wasteful, fraudulent, or abusive expenditure of funds. Such penalties include, but are not limited to, imposition of additional award conditions, payment suspension, award suspension, grant termination, de-obligation/clawback of funds, and debarment of organizations and/or personnel. • Conduct audits of subrecipients as are necessary and appropriate. Contractor shall report the results of any audits it conducts to the Arkansas State Broadband Office. • Develop a template contract for subrecipients, specifying key terms including contract length, performance standards, construction and service rollout schedules, competitive access requirements, regulatory compliance requirements, environmental controls, grant reporting and data sharing requirements, monitoring and oversight procedures, and penalties for non-compliance. • Retain and provide to the Arkansas State Broadband Office upon request all records, documents, and communications of any kind that relates in any manner to grant awards and project procurement, performance, and reimbursement. This data shall be labeled and stored in a manner that promotes transparency and facilitates ease of use by auditors. Additionally, MBI is building two new systems for ASBO and subgrantee use: 1. Broadband Grants Project Monitoring and Reimbursement System 2. Grant Application Submission, Evaluation, Award, and Appeal System These systems will have the following features: • Facilitate inputs, responses, data gathering, analysis, and adjudication decision recommendations and subsequent documentation of payment decisions for the Arkansas State Broadband Office’s final approval. • Provide a secure mechanism for grant applications and safeguard protected, proprietary, and other confidential information. • Assign a unique identifier to each application and each project. Contractor shall develop and apply a standardized naming convention to all applications and associated documents that will be maintained throughout award, technical review, project monitoring, and project closing. Documents shall be named and stored in a manner that facilitates ease of use by auditors. • System shall exhibit built-in quality controls, such as pre-screening, that assist applicants in submitting applications that meet all minimal requirements for consideration (such as requiring a SAM number). • MBI shall be responsible for pursuing and documenting additional information required for clarification of submitted applications, technical reviews of applications, and project monitoring • and reimbursement activities. These activities shall be completed within the framework of the Grant Application Submission, Evaluation, Award, and Appeal System or the Broadband Grants Project Monitoring and Reimbursement System and not through external email or other document exchange systems. Anticipated Completion Date: System anticipated go live Date: April 26, 2024 Contact Person: Glen E. Howie Director Department of Commerce, Arkansas State Broadband Office 1 Commerce Way, Suite. 601 Little Rock, AR 72202 (501) 682-1123 Glen.Howie@ArkansasEDC.gov
2023-005: Indirect Costs Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Value-Based Medical Student Education Training Program Assistance Listing Number: 93.680 Award Number and Year: T99HP39200 (July 1, 2020 – June 30, 2024) Award Period: July 1, 2022 – June 30, 2023 Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Applicable Institution: University of Mississippi Medical Center (UMMC) Criteria or Specific Requirement: Internal Control – Per 2 CFR section 200.303(a), a 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). Compliance – Per 2 CFR § 200.403, except where otherwise authorized by statute, costs must meet the following general criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award to be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award regarding 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. See also §200.306 Cost sharing or matching paragraph (b). (g) Be adequately documented. See also §§200.300 Statutory and national policy requirements through 200.309 Period of performance of this part. Condition: Indirect cost expense was improperly calculated. Questioned Costs: None Context: This condition occurred for the one award in our population. Cause: A transition to a new ERP system resulted in issues with calculating F&A according to our negotiated rate agreement. As a result, we recalculate F&A on each project when invoicing or reporting. This F&A entry was identified; however, it was not made timely. Effect: Indirect costs may be incorrectly charged to the program. Repeat Finding: No Recommendation: We recommend the institution strengthen its internal controls to ensure that calculations are reviewed and adjusted for, if necessary, in a timely manner. Views of Responsible Officials: There is no disagreement with the audit finding.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - 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): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report for the Allowable Costs/Cost Principles. The prior audit finding number was 2021-003. Condition and Context Food Service - Expenditures The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the payroll and payroll benefit costs charged to the grant. The School Corporation's process was to charge food service payroll and related benefits to a Foodservice Payroll fund, and then transfer funds from the Foodservice (School Lunch) fund to reimburse the Foodservice Payroll fund the following month. The amounts transferred from the School Lunch fund to the Foodservice Payroll fund did not always agree to the actual payroll paid. Six of the eleven transfers made during the audit period did not agree to actual payroll paid. This resulted in $144,679, in excess of actual payroll paid, being transferred from the School Lunch fund to the Foodservice Payroll fund. The transfers that were not properly supported were considered questioned costs. Food Service - Revenues The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to food service revenues being accounted for in the School Food Account. A School Food Authority (SFA) is required to account for all revenues and expenditures of its non-profit school food service in accordance with state and federal requirements. A SFA must operate its food services on a non-profit basis; all revenue generated by the school food service must be used to operate and improve its food services. The School Corporation's process was to receipt the School Lunch reimbursement received into a Federal Reimbursement fund and then transfer that reimbursement to the School Lunch fund the following month. One individual receipted the monthly reimbursement into the School Lunch fund, there was no documentation that an oversight or review process had been established to ensure the receipt was posted accurately. The April 2022 reimbursement of $158,679 was receipted into the Food Service Federal Reimbursement fund on July 7, 2022. The reimbursement had not been transferred to the School Lunch fund, which is the designated school food service fund, as of June 30, 2023. 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 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: "(a) 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 220.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. . . ." 7 CFR 210.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the sponsor principally for the benefit of children is retained and used only for the operation or improvement of the nonprofit food service. This account shall include, as appropriate, non-Federal funds used to support paid lunches as provided in § 210.14(e), and proceeds from non-program foods . . ." 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. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, unsupported costs were transferred out of the Foodservice fund and reimbursements were not timely receipted into the fund. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $144,679 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure costs transferred out are adequately documented and that reimbursements are timely receipted. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - 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): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report for the Allowable Costs/Cost Principles. The prior audit finding number was 2021-003. Condition and Context Food Service - Expenditures The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the payroll and payroll benefit costs charged to the grant. The School Corporation's process was to charge food service payroll and related benefits to a Foodservice Payroll fund, and then transfer funds from the Foodservice (School Lunch) fund to reimburse the Foodservice Payroll fund the following month. The amounts transferred from the School Lunch fund to the Foodservice Payroll fund did not always agree to the actual payroll paid. Six of the eleven transfers made during the audit period did not agree to actual payroll paid. This resulted in $144,679, in excess of actual payroll paid, being transferred from the School Lunch fund to the Foodservice Payroll fund. The transfers that were not properly supported were considered questioned costs. Food Service - Revenues The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to food service revenues being accounted for in the School Food Account. A School Food Authority (SFA) is required to account for all revenues and expenditures of its non-profit school food service in accordance with state and federal requirements. A SFA must operate its food services on a non-profit basis; all revenue generated by the school food service must be used to operate and improve its food services. The School Corporation's process was to receipt the School Lunch reimbursement received into a Federal Reimbursement fund and then transfer that reimbursement to the School Lunch fund the following month. One individual receipted the monthly reimbursement into the School Lunch fund, there was no documentation that an oversight or review process had been established to ensure the receipt was posted accurately. The April 2022 reimbursement of $158,679 was receipted into the Food Service Federal Reimbursement fund on July 7, 2022. The reimbursement had not been transferred to the School Lunch fund, which is the designated school food service fund, as of June 30, 2023. 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 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: "(a) 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 220.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. . . ." 7 CFR 210.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the sponsor principally for the benefit of children is retained and used only for the operation or improvement of the nonprofit food service. This account shall include, as appropriate, non-Federal funds used to support paid lunches as provided in § 210.14(e), and proceeds from non-program foods . . ." 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. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, unsupported costs were transferred out of the Foodservice fund and reimbursements were not timely receipted into the fund. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $144,679 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure costs transferred out are adequately documented and that reimbursements are timely receipted. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - 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): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report for the Allowable Costs/Cost Principles. The prior audit finding number was 2021-003. Condition and Context Food Service - Expenditures The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the payroll and payroll benefit costs charged to the grant. The School Corporation's process was to charge food service payroll and related benefits to a Foodservice Payroll fund, and then transfer funds from the Foodservice (School Lunch) fund to reimburse the Foodservice Payroll fund the following month. The amounts transferred from the School Lunch fund to the Foodservice Payroll fund did not always agree to the actual payroll paid. Six of the eleven transfers made during the audit period did not agree to actual payroll paid. This resulted in $144,679, in excess of actual payroll paid, being transferred from the School Lunch fund to the Foodservice Payroll fund. The transfers that were not properly supported were considered questioned costs. Food Service - Revenues The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to food service revenues being accounted for in the School Food Account. A School Food Authority (SFA) is required to account for all revenues and expenditures of its non-profit school food service in accordance with state and federal requirements. A SFA must operate its food services on a non-profit basis; all revenue generated by the school food service must be used to operate and improve its food services. The School Corporation's process was to receipt the School Lunch reimbursement received into a Federal Reimbursement fund and then transfer that reimbursement to the School Lunch fund the following month. One individual receipted the monthly reimbursement into the School Lunch fund, there was no documentation that an oversight or review process had been established to ensure the receipt was posted accurately. The April 2022 reimbursement of $158,679 was receipted into the Food Service Federal Reimbursement fund on July 7, 2022. The reimbursement had not been transferred to the School Lunch fund, which is the designated school food service fund, as of June 30, 2023. 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 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: "(a) 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 220.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. . . ." 7 CFR 210.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the sponsor principally for the benefit of children is retained and used only for the operation or improvement of the nonprofit food service. This account shall include, as appropriate, non-Federal funds used to support paid lunches as provided in § 210.14(e), and proceeds from non-program foods . . ." 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. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, unsupported costs were transferred out of the Foodservice fund and reimbursements were not timely receipted into the fund. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $144,679 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure costs transferred out are adequately documented and that reimbursements are timely receipted. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.