Federal Agency: Department of Education Federal Program: Education Stabilization Fund Assistance Listing Number: 84.425E Federal Award Identification Number and Year: N/A Award Period: September 1, 2022 to August 31, 2023 Type of Finding: • Significant Deficiency in Internal Control Over Compliance • Other Matters Criteria or Specific Requirement: In accordance with 2 CFR Section 200.407, institutions distributing HEERF funding are required to ensure that students meet the eligibility requirements of the program while following established policies and procedures. In addition, per Uniform Guidance 2 CFR 200.303, entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations and program compliance requirements. Condition: During our testing of student expenditures of HEERF funding, we identified certain internal control policies of the District were not followed. Questioned Costs: None Context: During our testing of the HEERF student expenditures, we identified certain instances where internal control policies of the District were not followed at Northwest Vista College. Cause: The District in certain instances did not follow the internal control policies implemented around the awarding of HEERF student funds. Effect: There were certain instances where HEERF funds were disbursed that did not follow the District’s internal control policies. Repeat Finding: No Recommendation: We recommend that the District review their internal processes and ensure all internal control policies are followed. Views of Responsible Officials: There is no disagreement with the audit finding. The District has a plan to correct the finding.
Federal Agency: Department of Education Federal Program: Education Stabilization Fund Assistance Listing Number: 84.425E Federal Award Identification Number and Year: N/A Award Period: September 1, 2022 to August 31, 2023 Type of Finding: • Significant Deficiency in Internal Control Over Compliance • Other Matters Criteria or Specific Requirement: In accordance with 2 CFR Section 200.407, institutions distributing HEERF funding are required to ensure that students meet the eligibility requirements of the program while following established policies and procedures. In addition, per Uniform Guidance 2 CFR 200.303, entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations and program compliance requirements. Condition: During our testing of student expenditures of HEERF funding, we identified certain internal control policies of the District were not followed. Questioned Costs: None Context: During our testing of the HEERF student expenditures, we identified certain instances where internal control policies of the District were not followed at Northwest Vista College. Cause: The District in certain instances did not follow the internal control policies implemented around the awarding of HEERF student funds. Effect: There were certain instances where HEERF funds were disbursed that did not follow the District’s internal control policies. Repeat Finding: No Recommendation: We recommend that the District review their internal processes and ensure all internal control policies are followed. Views of Responsible Officials: There is no disagreement with the audit finding. The District has a plan to correct the finding.
Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Operation of a Child Care Resource Center - Baltimore, Harford and Cecil Counties; Professional Development/Quality (688) Operation of a Child Care Resource Center - Baltimore, Harford and Cecil Counties; Infants and Toddlers (689) Specialized Training for Caregivers and Child Care Providers (707) Growing Opportunities in Family Child Care (GOFCC) Planning Period (684) Infant & Early Childhood Mental Health Support Services - Harford and Cecil Counties (668) Infant & Early Childhood Mental Health Support Services - Baltimore County (689) Operation of a Child Care Resource Center - Baltimore, Harford and Cecil Counties (691) Maryland Rebuilds Initiative Grant (708) Assistance Listing Number: 93.575 Award Periods: July 1, 2022 – December 31, 2023 (668, 669) March 1, 2022 – August 31, 2022 (684) July 1, 2022 – June 30, 2023 (688, 689, 691) August 15, 2022 – June 30, 2025 (707) December 1, 2022 – June 30, 2024 (708) Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort for one employee was not properly approved by a separate individual. Context: Of the general disbursement population, $268,163 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $372,815 were booked via unsupported journal entry (allocated). Additionally, twenty out of twenty credit card transactions selected did not have evidence of approval. Lastly, one of the forty payroll transactions tested did not have proper approval by a separate individual. Questioned Costs: $640,978 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
Education Stabilization Fund, Higher Education Emergency Relief Fund (HEERF) - Institutional Portion #84.425F U.S. Department of Education Award Year 2022 Criteria or Specific Requirement - Allowable Costs. According to 2 CFR Section 200.407 reasonable direct administrative costs and indirect costs at an institution's approved negotiated indirect cost rate may be charged against Assistance Listing 84.425F (Institutional portion). Condition - The College improperly charged an indirect cost to the federal grant for an ineligible expense that was ineligible based on the Indirect Cost Rate Agreement. The College has an approved Indirect Cost rate of 49.90 percent. Under the rate agreement, the College is approved to charge an indirect cost fee based on modified total direct costs. Modified total direct costs include direct salaries and wages, applicable fringe benefits, material and supplies, services, travel and up to the first $25,000 of each subaward. Modified total direct costs shall exclude equipment and capital expenditures if they have a useful life greater than one year and a per-unit acquisition costs which equal or exceeds $5,000. Questioned Costs - Grant Award Number: P425F201877 - 20B. Error resulted in questioned costs of $34,291 awarded to the College. Context - Out of a population of 114 institutional expenses totaling $598,317, we selected 18 institutional expenses for $416,864 to test and trace back to supporting documentation to support the charge to the federal award. For one of 18 institutional expenses selected for testing, the entire balance of the $34,291 was not considered an allowable costs since the expenditure was an indirect fee charge based on a capital expenditure. The sample was not, and was not intended to be, a statistically valid sample. Effect - The College was not in compliance with the allowable costs of the Education Stabilization Fund program. Cause - Management made an error in interpreting the indirect cost agreement associated with the equipment and capital expenditure for one of the items selected for testing. Identification as a Repeat Finding - No. Recommendation - We recommend that management review this area and establish procedures to ensure all requirements are met. View of Responsible Official and Planned Corrective Actions ? In including the questioned indirect cost as a HEERF expense, management only considered the per unit cost threshold, rather than both the per unit cost and the expected life of the items. The audit clarified the regulations and Donnelly promptly notified our program officer, posted a corrected quarterly report and refunded the funds to the Department of Education.
FINDING 2022-003 DYER COUNTY SCHOOL DEPARTMENT HAD DEFICIENCIES IN THE USE OF EPIDEMIOLOGY AND LABORATORY CAPACITY FOR INFECTIOUS DISEASES (ELC) GRANT FUNDS, WHICH RESULTED IN QUESTIONED COSTS (A. ? Noncompliance Under Government Auditing Standards and OMB Uniform Guidance; B. - Internal Control ? Significant Deficiency Under Government Auditing Standards and OMB Uniform Guidance) Entity Dyer County, Tennessee ? School Department Repeat Finding Number N/A Assistance Listings # 93.323 Assistance Listings Title Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Agency Department of Health and Human Services State Pass-Through Agency Department of Education Grant/Contract No. N/A Federal Award Year 2022 Finding Type Noncompliance and Internal Control ? 93.323 Compliance Requirement Allowable Cost/Cost Principles Known Questioned Costs $63,589 The school department was awarded an Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (FAL No. 93.323) made available from the American Rescue Plan Act of 2021, passed through the Tennessee Department of Education. We audited the ELC grant as a major federal program in compliance with Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). As part of our audit procedures, we tested a sample of 32 disbursement items for the period July 1, 2021, through June 30, 2022. Based on our test work, we noted the following deficiencies, which are the result of a lack of management oversight: A. On July 26, 2021, the following administrative staff received bonuses paid with ELC funds as direct grant costs: Director of Schools $27,688; Business and Finance Manager $11,886; Special Education Director $8,037; Federal Projects Bookkeeper $4,126 Federal Projects Bookkeeper (former) $4,126; Payroll Bookkeeper $3,863; Accounts Payable/Receivable Bookkeeper $3,863; for a total of $63,589. Section 200.413 of the Uniform Guidance provides that administrative and clerical staff should normally be treated as indirect costs; however, direct charging of these costs may be appropriate only if all of the following conditions are met: 1. Administrative or clerical services are integral to a project or activity; 2. Individuals involved can be specifically identified with the project or activity; 3. Such costs are explicitly included in the budget or have prior written approval of the federal awarding agency; and 4. The costs are not recovered as indirect costs. We were not provided with adequate documentation to support these payments as direct costs. The services provided by the administrative staff do not appear to be integral to the ELC grant; the individuals were not specifically identified to the project; and the bonuses were not explicitly included in the budget, nor did they have prior written approval of the federal awarding agency. At the time the bonuses were paid, the ELC grant documentation listed the following as allowable direct uses of funds: salaries, benefits, and contract costs of nurses; travel reimbursed at .47 per mile; contracts with academic institutions, private laboratories, or other healthcare entities to process test kits; supplies and equipment for testing; minor construction for safer testing locations; costs associated with operating alternate/pop-up sites; costs for running mass testing programs; and shipping, postage, printing, and duplicating costs. Updated guidance for the ELC grant was issued on August 2, 2021. Per the updated guidance, when determining allowable costs, grant recipients were referred to the cost principles regulation found in 45 CFR Part 75 Subpart E ? Cost Principles which states that allowable costs should be necessary and reasonable for the performance of the federal award, be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the entity, and be adequately documented. It further states that costs are reasonable if they do not exceed that which would be incurred by a prudent person under the circumstance. These bonuses do not appear to be reasonable and necessary for the performance of the award, are not consistent with other grants and programs of the school system and were not properly documented. B. Duties were not adequately segregated concerning the bonus payments associated with ELC grant funds. The bonuses paid to the administrative staff were not specifically approved by the grantor or the board of education. The board of education did approve a budget amendment on February 1, 2022, allowing bonuses under this grant program totaling $141,519, which included $62,295 for nurses and transportation and maintenance staff; however, the board of education was not given a breakdown of who received a bonus and the individual amounts. It should be noted that the current chairman of the board of education advised that he was unaware the director of schools received amounts in excess of her contract. As a result, the director of schools authorized a bonus payment to herself without prior approval of the board of education. As a result of the deficiencies noted above, we have questioned the cost of the bonuses for administrative staff totaling $63,589 for the period July 1, 2021, through June 30, 2022. RECOMMENDATION The board of education should determine the propriety and reasonableness of the bonus payments paid to the administrative staff from ELC funds. The board should take steps to resolve the questioned costs. Duties should be properly segregated. The director of schools should not approve her own bonus payments. MANAGEMENT?S RESPONSE ? DIRECTOR OF SCHOOLS We disagree with this finding. With regard to the matters referenced in section A of the draft finding, we take issue with the allegations that the bonuses paid to the administrative staff were not explicitly included in the grant budget, the individuals receiving the bonuses were not identified to the grantor and the grantor did not approve of the bonus payments, all of which are absolutely false. Section 200.407 of the Uniform Guidance provides: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or nonallocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs." On June 14, 2021, the Dyer County School's ELC grant application was approved by the grantor in the amount of $1,021,466.91. The approved budget for the grant expressly included bonus payments in the amount of $63,589.14 to the Administrators, Director, and other related personnel for duties and responsibilities related to the implementation and administration of the COVID Testing program. See Exhibit A, approved grant budget for Account Number: 72130-Other Student Support, Line-Item Number: 188-Bonus Payments in the amount of $63,589.14. Not only were the administrative bonus payments specifically approved by the grantor in the budget, but the grantor was also provided with the names and exact amounts paid to each member of the administrative staff when the system requested and thereafter received reimbursement from the grantor for those payments. See Exhibit B, Statement of Expenditures and Encumbrances dated August 30, 2021, which was submitted to the grantor. When your office first raised this issue, we immediately confirmed that it was proper for ELC grant funds to be used to pay bonuses to the administrative staff for duties and responsibilities related to the implementation and administration of the program. See Exhibit C, email to Wendy Smith, Business and Finance Manager for the school system, dated August 29, 2022, from Kristi Steele, Director of Mental Health, Tennessee Department of Education, which provides: ?ELC funding can be used to pay stipends/salaries for individuals such as coordinated school health coordinators, district level administrators, etc. who manage the grant and who have been handling COVID response to their districts.? Your staff auditor, who was copied on the email from Ms. Steel, then asserted that the administrative staff was required under the grant to keep timesheets documenting the time spent related to the implementation and administration of COVID response for the school system. Exhibit D is an email dated August 30, 2022, from Jennifer Sanchez, Public Health Administrator II (Project Manager), Tennessee Department of Health, confirming the timesheets were not, in fact, a requirement for the payment of bonuses under the grant. Moreover, Maryanne Durksi, Executive Director, Office of Local Finance, Tennessee Department of Education has advised: ?the approved application in ePlan, with the stipends clearly in the narrative, should be documentation that these were approved by the state.? As a result of the foregoing, we believe the allegations in section A of the draft audit finding are without merit and should be removed from your final audit. With regards to the matters in section B of the draft finding, we take issue with the allegations that the bonuses paid to the administrative staff for the extra duties and responsibilities related to the implementation and administration of the ELC grant were not approved by the grantor or the board of education. The grantor's approval of the payments to the administrative staff in connection with the grant was discussed above and such will not be repeated again. We agree with you that Mr. Jeremy Gatlin, the current chairman of the board of education, has advised that he was not aware that the Director was one of the individuals who received bonus payments under the grant, but we find it curious that your draft finding does not also mention the very relevant additional information provided to your office by Mr. Keith Anderson, who was the chairman of the board of education at the time the ELC application was submitted, approved by the state and payments made to the administrative staff. See Exhibit E, statement of Keith Anderson, confirming that in May of 2021 he had a telephone conversation with Mrs. Wendy Smith regarding the grant application, that he was aware of and gave his approval regarding the employees eligible to receive a stipend due to extra duties associated with the COVID response program, including, but not limited to, the administrative, financial staff and the Director of Schools, the amounts of stipend each would receive in each group, and the percentages of salaries the stipend would equal. As you noted, the board of education approved the budget amendment regarding the ELC Grant on February 1, 2022. The budget amendment accurately reflects that the stipends paid under the grant to the administrative staff was transferred to the proper accounts, as approved in the grant budget, account 72130, line item 188 ? Other Student Support. We agree with you that the board of education was not provided a breakdown of who received a bonus and the individual amounts at the time the budget amendment was adopted. Any future bonus payments to members of the administrative staff will be approved by the board prior to disbursement to ensure that duties are? adequately segregated. We believe the methodology used for determining the amount of bonus payments to each group of employees/SROs involved with the implementation and management of the COVID response program and the allocation of such funds among the various individuals based on their program responsibilities was reasonable, but we defer to the board of education's response, set forth below, to address your recommendation that the board determine the propriety and reasonableness of the bonus payments paid to the administrative staff from ELC funds. MANAGEMENT?S RESPONSE ? DR. JEREMY GATLIN, BOARD OF EDUCATION CHAIRMAN The board disagrees with this finding. The board agrees with the response provided by the Director, as set forth above. The board believes it was appropriate to utilize a portion of the ELC grant funds to provide bonus payments to the administrative staff for the additional duties and responsibilities required to manage and administer the COVID response program for the benefit of approximately 4,000 students and employees of the school system over the term of the grant. Section 200.430(6) of the Uniform Guidelines provides: Reasonableness. Compensation for employees engaged in work on Federal awards will be considered reasonable to the extent that it is consistent with that paid for similar work in other activities of the non-Federal entity. The bonus payments provided to the members of the administrative staff to manage the COVID response program were reasonable because the payments were determined based on the additional program responsibilities required of each of them in a manner that is consistent with the amounts paid to them for similar work in other activities on behalf of the school system. Going forward, any bonus payments provided to members of the administrative staff will be approved by the board before the funds are disbursed to ensure that duties are adequately segregated. AUDITOR?S COMMENT The budget for the ELC grant submitted to the Tennessee Department of Education did include $63,589 budgeted to Other Student Support ? Bonus Payments; however, the narrative description stated that it included ?SRO?s, Administrators, Director, and other related personnel.? There were no SRO?s paid from this line-item, and the director of schools was not specifically mentioned. Director in this instance could have implied the director of the program administering the grant. The only personnel paid from this budget line were the director of schools and six other administrative staff members. The narrative appears misleading and would not be sufficient to give prior explicit approval for these types of bonuses. The response of the director of schools? quotes Section 200.407 of the Uniform Guidance which provides: " ? the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs." It should be noted the budget submitted for bonus payments was made to the Tennessee Department of Education which is a non-federal entity. The Federal awarding agency for this award is the U.S. Department of Education. Regardless of the matter of whether or was not there was proper approval to pay bonuses, there still must be proper documentation to support that the person was actually entitled to receive the bonus. Uniform Guidance Section 200.430(i) states ?Standards of Documentation of Personnel Expenses. (1) charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must include: ? (vii) Support the distribution of the employee?s salary or wage among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and a non-federal award, an indirect cost activity and a direct cost activity, two or more indirect activities??. The school department has not provided us with any documented evidence to support that these individuals performed any work on this federal award. Without any supporting documentation of actual work performed on the grant by these individuals, we cannot attest these individuals were entitled to receive a bonus. Auditors were told by the former chairman of the Board of Education that he gave verbal approval of the bonuses; however, without any written documentation, we cannot attest that this happened. Furthermore, the former chairman has no authority on his own to approve bonus payments. The Board of Education, as a whole, would need to vote in order to grant such approval. As mentioned in the finding, the board of education did approve a budget amendment on February 1, 2022. However, it is important to note that this amendment occurred approximately seven months after the bonuses were paid and makes no mention of bonuses being paid to anyone or the amounts these individuals received. The explanation of the amendment states, ?these funds will be used to reimburse a portion of General Purpose funds already budgeted for line items for? Administrative Financial Staff for salary associated with the responsibilities related to duties under the ELC Grant?? Therefore, from the evidence presented to us, it is not clear that the Board of Education, as a whole, even knew these bonuses were paid until reported in our finding and the budget amendment itself does not provide adequate support for the proper approval of these payments as bonuses. The response of the Board of Education references Section 200.430(b) of the Uniform Guidelines provides: Reasonableness. Compensation for employees engaged in work on Federal awards will be considered reasonable to the extent that it is consistent with that paid for similar work in other activities of the non-Federal entity. While bonuses paid with local funds typically do not require a timesheet, Section 200.430(i) states ?Standards of Documentation of Personnel Expenses. (1) charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed...?, In order for us to determine if these bonuses were reasonable and allowable, there must be documented proof that the administrative personnel receiving the bonuses actually devoted their time to administering the grant. We have not been presented with any documented evidence that the administrative staff spent any time on this grant. Furthermore, these administrative staff members were not paid bonuses for any of the hours they devoted to the other federal grants received by the school department. Therefore, the paying of bonuses associated with the ELC grant was inconsistent with the other grants received by the Board of Education. Additionally, the director of schools is employed through a contract between the director of schools and the board of education for the period January 5, 2021, through June 30, 2023, which states that the duties of the director of schools will generally be performed during normal business hours, but it is expressly agreed that the duties will require her to work during times other than normal business hours. The contract makes no mention of bonuses, and it appears anything beyond normal business hours is already included in her contract amount. Therefore, it is questionable if the director?s contract allows for the payment of a bonus.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Material Weakness/Noncompliance Finding Number: 2022-001 Assistance Listing Number and Title: AL #84.425D COVID-19 ? Education Stabilization Fund Federal Award Identification Number / Year: 2022 Federal Agency: US Department of Education Compliance Requirement: Equipment Pass-Through Entity: Ohio Department of Education Repeat Finding from Prior Audit? No 2 CFR ? 3474.1 gives regulatory effect to the Department of Education for 2 CFR ? 200.313(c) through (d) which require that: (c) Equipment must be used in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award or, when appropriate, under other Federal awards; however, the non-Federal entity must not encumber the equipment without prior approval of the Federal awarding agency. (d) Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: 1. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. 2. A physical inventory of the property must be taken and the results reconciled with the property records at least once every 2 years. 3. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 4. Adequate maintenance procedures must be developed to keep the property in good condition. 5. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures), ESF funds may be used for these purposes. Recipients and subrecipients may use ESF funds to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. In addition, with prior approval by the ED or the pass-through entity, recipients and subrecipients may use ESF funds to purchase real property and perform construction for improvements to land, buildings, or equipment that meet the overall purpose of the ESF program, which is ?to prevent, prepare for, and respond to? the COVID-19 pandemic. In addition to the guidance noted above, the Uniform Guidance at 2 CFR ? 200.407 requires prior written approval from either the Department or the State (Governor or SEA, as applicable) for certain costs, such as the purchase of real property; equipment and other capital expenditures; entertainment costs; and travel costs. The School District failed to properly track assets purchased or improvements completed with ESF (specifically Elementary and Secondary School Emergency Relief or ESSER) funds in their Equipment Inventory System. This resulted in unrecorded assets of approximately $209,788 purchased with ESSER Funds not recorded in the inventory system. This would not allow for proper tracking as required above. This was the result of the School District Treasurer not adding all assets to the system. The School District also did not receive proper approval before the purchase of Phenomenal Aire Units. We recommend the School District Treasurer review the Equipment Inventory System and adjust it to include all assets purchased with ESSER Funds. We further recommend the School District ensure it receives all proper approvals as required for any capital asset expenditures purchased with ESSER funds. Officials? Response: Moving forward the School District Treasurer will make sure and double check all inventory purchased with ESSER Funds are in the inventory system if it is over the capital asset threshold. Also, she will make sure all capital asset expenditures purchased with ESSER funds have proper approval.
Material Weakness/Noncompliance Finding Number: 2022-001 Assistance Listing Number and Title: AL #84.425D COVID-19 ? Education Stabilization Fund Federal Award Identification Number / Year: 2022 Federal Agency: US Department of Education Compliance Requirement: Equipment Pass-Through Entity: Ohio Department of Education Repeat Finding from Prior Audit? No 2 CFR ? 3474.1 gives regulatory effect to the Department of Education for 2 CFR ? 200.313(c) through (d) which require that: (c) Equipment must be used in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award or, when appropriate, under other Federal awards; however, the non-Federal entity must not encumber the equipment without prior approval of the Federal awarding agency. (d) Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: 1. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. 2. A physical inventory of the property must be taken and the results reconciled with the property records at least once every 2 years. 3. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 4. Adequate maintenance procedures must be developed to keep the property in good condition. 5. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures), ESF funds may be used for these purposes. Recipients and subrecipients may use ESF funds to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. In addition, with prior approval by the ED or the pass-through entity, recipients and subrecipients may use ESF funds to purchase real property and perform construction for improvements to land, buildings, or equipment that meet the overall purpose of the ESF program, which is ?to prevent, prepare for, and respond to? the COVID-19 pandemic. In addition to the guidance noted above, the Uniform Guidance at 2 CFR ? 200.407 requires prior written approval from either the Department or the State (Governor or SEA, as applicable) for certain costs, such as the purchase of real property; equipment and other capital expenditures; entertainment costs; and travel costs. The School District failed to properly track assets purchased or improvements completed with ESF (specifically Elementary and Secondary School Emergency Relief or ESSER) funds in their Equipment Inventory System. This resulted in unrecorded assets of approximately $209,788 purchased with ESSER Funds not recorded in the inventory system. This would not allow for proper tracking as required above. This was the result of the School District Treasurer not adding all assets to the system. The School District also did not receive proper approval before the purchase of Phenomenal Aire Units. We recommend the School District Treasurer review the Equipment Inventory System and adjust it to include all assets purchased with ESSER Funds. We further recommend the School District ensure it receives all proper approvals as required for any capital asset expenditures purchased with ESSER funds. Officials? Response: Moving forward the School District Treasurer will make sure and double check all inventory purchased with ESSER Funds are in the inventory system if it is over the capital asset threshold. Also, she will make sure all capital asset expenditures purchased with ESSER funds have proper approval.
U.S. Department of Education 2022-005: Unallowable Costs Federal Agency: Department of Education Federal Program: COVID-19 Higher Education Emergency Relief Funds (HEERF)/Coronavirus Aid, Relief and Economic Security (CARES) Act ? Institutional Portion Assistance Listing Number: 84.425F Federal Award Identification Number and Year: P425F204159 - 2022 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: The Uniform Guidance Cost Principles described in 2 CFR Part 200, Subpart E, apply to the HEERF subprogram. Institutions generally have broad uses of funds. Some items of cost in Subpart E of the Uniform Guidance require prior approval under 2 CFR section 200.407 by ED. However, in its HEERF II FAQs published on January 14, 2021, and HEERF III FAQs published on May 11, 2021, ED waived prior approval for certain items of cost (as described in questions 20 and 45, respectively). Specifically, the HEERF grant funds must not be used for construction or purchase of real property. In addition, 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations and program compliance requirements. Condition: The District used grants fund for construction costs that were identified as delays, labor rate escalation and supply chain issues related to COVID-19. Questioned Costs: $614,352 Context: The District expended $5,888,620 in HEERF ? Institutional Portion funds for direct costs, lost revenue and bad debt write off during the fiscal year. Cause: Costs were identified on invoices and changes orders as COVID-19 related. The District had interpreted delayed costs related to COVID-19 as allowable. Effect: Noncompliance with allowable cost principles. Repeat Finding: This was not a finding in the prior year. Recommendation: Implement procedures to ensure all grant expenditures are reviewed by fiscal management for additional review. Views of responsible officials: Management concurs with the finding and plans to correct the finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
Education Stabilization Fund, Higher Education Emergency Relief Fund (HEERF) - Institutional Portion #84.425F U.S. Department of Education Award Year 2022 Criteria or Specific Requirement - Allowable Costs. According to 2 CFR Section 200.407 reasonable direct administrative costs and indirect costs at an institution's approved negotiated indirect cost rate may be charged against Assistance Listing 84.425F (Institutional portion). Condition - The College improperly charged an indirect cost to the federal grant for an ineligible expense that was ineligible based on the Indirect Cost Rate Agreement. The College has an approved Indirect Cost rate of 49.90 percent. Under the rate agreement, the College is approved to charge an indirect cost fee based on modified total direct costs. Modified total direct costs include direct salaries and wages, applicable fringe benefits, material and supplies, services, travel and up to the first $25,000 of each subaward. Modified total direct costs shall exclude equipment and capital expenditures if they have a useful life greater than one year and a per-unit acquisition costs which equal or exceeds $5,000. Questioned Costs - Grant Award Number: P425F201877 - 20B. Error resulted in questioned costs of $34,291 awarded to the College. Context - Out of a population of 114 institutional expenses totaling $598,317, we selected 18 institutional expenses for $416,864 to test and trace back to supporting documentation to support the charge to the federal award. For one of 18 institutional expenses selected for testing, the entire balance of the $34,291 was not considered an allowable costs since the expenditure was an indirect fee charge based on a capital expenditure. The sample was not, and was not intended to be, a statistically valid sample. Effect - The College was not in compliance with the allowable costs of the Education Stabilization Fund program. Cause - Management made an error in interpreting the indirect cost agreement associated with the equipment and capital expenditure for one of the items selected for testing. Identification as a Repeat Finding - No. Recommendation - We recommend that management review this area and establish procedures to ensure all requirements are met. View of Responsible Official and Planned Corrective Actions ? In including the questioned indirect cost as a HEERF expense, management only considered the per unit cost threshold, rather than both the per unit cost and the expected life of the items. The audit clarified the regulations and Donnelly promptly notified our program officer, posted a corrected quarterly report and refunded the funds to the Department of Education.
FINDING 2022-003 DYER COUNTY SCHOOL DEPARTMENT HAD DEFICIENCIES IN THE USE OF EPIDEMIOLOGY AND LABORATORY CAPACITY FOR INFECTIOUS DISEASES (ELC) GRANT FUNDS, WHICH RESULTED IN QUESTIONED COSTS (A. ? Noncompliance Under Government Auditing Standards and OMB Uniform Guidance; B. - Internal Control ? Significant Deficiency Under Government Auditing Standards and OMB Uniform Guidance) Entity Dyer County, Tennessee ? School Department Repeat Finding Number N/A Assistance Listings # 93.323 Assistance Listings Title Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Agency Department of Health and Human Services State Pass-Through Agency Department of Education Grant/Contract No. N/A Federal Award Year 2022 Finding Type Noncompliance and Internal Control ? 93.323 Compliance Requirement Allowable Cost/Cost Principles Known Questioned Costs $63,589 The school department was awarded an Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) (FAL No. 93.323) made available from the American Rescue Plan Act of 2021, passed through the Tennessee Department of Education. We audited the ELC grant as a major federal program in compliance with Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). As part of our audit procedures, we tested a sample of 32 disbursement items for the period July 1, 2021, through June 30, 2022. Based on our test work, we noted the following deficiencies, which are the result of a lack of management oversight: A. On July 26, 2021, the following administrative staff received bonuses paid with ELC funds as direct grant costs: Director of Schools $27,688; Business and Finance Manager $11,886; Special Education Director $8,037; Federal Projects Bookkeeper $4,126 Federal Projects Bookkeeper (former) $4,126; Payroll Bookkeeper $3,863; Accounts Payable/Receivable Bookkeeper $3,863; for a total of $63,589. Section 200.413 of the Uniform Guidance provides that administrative and clerical staff should normally be treated as indirect costs; however, direct charging of these costs may be appropriate only if all of the following conditions are met: 1. Administrative or clerical services are integral to a project or activity; 2. Individuals involved can be specifically identified with the project or activity; 3. Such costs are explicitly included in the budget or have prior written approval of the federal awarding agency; and 4. The costs are not recovered as indirect costs. We were not provided with adequate documentation to support these payments as direct costs. The services provided by the administrative staff do not appear to be integral to the ELC grant; the individuals were not specifically identified to the project; and the bonuses were not explicitly included in the budget, nor did they have prior written approval of the federal awarding agency. At the time the bonuses were paid, the ELC grant documentation listed the following as allowable direct uses of funds: salaries, benefits, and contract costs of nurses; travel reimbursed at .47 per mile; contracts with academic institutions, private laboratories, or other healthcare entities to process test kits; supplies and equipment for testing; minor construction for safer testing locations; costs associated with operating alternate/pop-up sites; costs for running mass testing programs; and shipping, postage, printing, and duplicating costs. Updated guidance for the ELC grant was issued on August 2, 2021. Per the updated guidance, when determining allowable costs, grant recipients were referred to the cost principles regulation found in 45 CFR Part 75 Subpart E ? Cost Principles which states that allowable costs should be necessary and reasonable for the performance of the federal award, be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the entity, and be adequately documented. It further states that costs are reasonable if they do not exceed that which would be incurred by a prudent person under the circumstance. These bonuses do not appear to be reasonable and necessary for the performance of the award, are not consistent with other grants and programs of the school system and were not properly documented. B. Duties were not adequately segregated concerning the bonus payments associated with ELC grant funds. The bonuses paid to the administrative staff were not specifically approved by the grantor or the board of education. The board of education did approve a budget amendment on February 1, 2022, allowing bonuses under this grant program totaling $141,519, which included $62,295 for nurses and transportation and maintenance staff; however, the board of education was not given a breakdown of who received a bonus and the individual amounts. It should be noted that the current chairman of the board of education advised that he was unaware the director of schools received amounts in excess of her contract. As a result, the director of schools authorized a bonus payment to herself without prior approval of the board of education. As a result of the deficiencies noted above, we have questioned the cost of the bonuses for administrative staff totaling $63,589 for the period July 1, 2021, through June 30, 2022. RECOMMENDATION The board of education should determine the propriety and reasonableness of the bonus payments paid to the administrative staff from ELC funds. The board should take steps to resolve the questioned costs. Duties should be properly segregated. The director of schools should not approve her own bonus payments. MANAGEMENT?S RESPONSE ? DIRECTOR OF SCHOOLS We disagree with this finding. With regard to the matters referenced in section A of the draft finding, we take issue with the allegations that the bonuses paid to the administrative staff were not explicitly included in the grant budget, the individuals receiving the bonuses were not identified to the grantor and the grantor did not approve of the bonus payments, all of which are absolutely false. Section 200.407 of the Uniform Guidance provides: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or nonallocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs." On June 14, 2021, the Dyer County School's ELC grant application was approved by the grantor in the amount of $1,021,466.91. The approved budget for the grant expressly included bonus payments in the amount of $63,589.14 to the Administrators, Director, and other related personnel for duties and responsibilities related to the implementation and administration of the COVID Testing program. See Exhibit A, approved grant budget for Account Number: 72130-Other Student Support, Line-Item Number: 188-Bonus Payments in the amount of $63,589.14. Not only were the administrative bonus payments specifically approved by the grantor in the budget, but the grantor was also provided with the names and exact amounts paid to each member of the administrative staff when the system requested and thereafter received reimbursement from the grantor for those payments. See Exhibit B, Statement of Expenditures and Encumbrances dated August 30, 2021, which was submitted to the grantor. When your office first raised this issue, we immediately confirmed that it was proper for ELC grant funds to be used to pay bonuses to the administrative staff for duties and responsibilities related to the implementation and administration of the program. See Exhibit C, email to Wendy Smith, Business and Finance Manager for the school system, dated August 29, 2022, from Kristi Steele, Director of Mental Health, Tennessee Department of Education, which provides: ?ELC funding can be used to pay stipends/salaries for individuals such as coordinated school health coordinators, district level administrators, etc. who manage the grant and who have been handling COVID response to their districts.? Your staff auditor, who was copied on the email from Ms. Steel, then asserted that the administrative staff was required under the grant to keep timesheets documenting the time spent related to the implementation and administration of COVID response for the school system. Exhibit D is an email dated August 30, 2022, from Jennifer Sanchez, Public Health Administrator II (Project Manager), Tennessee Department of Health, confirming the timesheets were not, in fact, a requirement for the payment of bonuses under the grant. Moreover, Maryanne Durksi, Executive Director, Office of Local Finance, Tennessee Department of Education has advised: ?the approved application in ePlan, with the stipends clearly in the narrative, should be documentation that these were approved by the state.? As a result of the foregoing, we believe the allegations in section A of the draft audit finding are without merit and should be removed from your final audit. With regards to the matters in section B of the draft finding, we take issue with the allegations that the bonuses paid to the administrative staff for the extra duties and responsibilities related to the implementation and administration of the ELC grant were not approved by the grantor or the board of education. The grantor's approval of the payments to the administrative staff in connection with the grant was discussed above and such will not be repeated again. We agree with you that Mr. Jeremy Gatlin, the current chairman of the board of education, has advised that he was not aware that the Director was one of the individuals who received bonus payments under the grant, but we find it curious that your draft finding does not also mention the very relevant additional information provided to your office by Mr. Keith Anderson, who was the chairman of the board of education at the time the ELC application was submitted, approved by the state and payments made to the administrative staff. See Exhibit E, statement of Keith Anderson, confirming that in May of 2021 he had a telephone conversation with Mrs. Wendy Smith regarding the grant application, that he was aware of and gave his approval regarding the employees eligible to receive a stipend due to extra duties associated with the COVID response program, including, but not limited to, the administrative, financial staff and the Director of Schools, the amounts of stipend each would receive in each group, and the percentages of salaries the stipend would equal. As you noted, the board of education approved the budget amendment regarding the ELC Grant on February 1, 2022. The budget amendment accurately reflects that the stipends paid under the grant to the administrative staff was transferred to the proper accounts, as approved in the grant budget, account 72130, line item 188 ? Other Student Support. We agree with you that the board of education was not provided a breakdown of who received a bonus and the individual amounts at the time the budget amendment was adopted. Any future bonus payments to members of the administrative staff will be approved by the board prior to disbursement to ensure that duties are? adequately segregated. We believe the methodology used for determining the amount of bonus payments to each group of employees/SROs involved with the implementation and management of the COVID response program and the allocation of such funds among the various individuals based on their program responsibilities was reasonable, but we defer to the board of education's response, set forth below, to address your recommendation that the board determine the propriety and reasonableness of the bonus payments paid to the administrative staff from ELC funds. MANAGEMENT?S RESPONSE ? DR. JEREMY GATLIN, BOARD OF EDUCATION CHAIRMAN The board disagrees with this finding. The board agrees with the response provided by the Director, as set forth above. The board believes it was appropriate to utilize a portion of the ELC grant funds to provide bonus payments to the administrative staff for the additional duties and responsibilities required to manage and administer the COVID response program for the benefit of approximately 4,000 students and employees of the school system over the term of the grant. Section 200.430(6) of the Uniform Guidelines provides: Reasonableness. Compensation for employees engaged in work on Federal awards will be considered reasonable to the extent that it is consistent with that paid for similar work in other activities of the non-Federal entity. The bonus payments provided to the members of the administrative staff to manage the COVID response program were reasonable because the payments were determined based on the additional program responsibilities required of each of them in a manner that is consistent with the amounts paid to them for similar work in other activities on behalf of the school system. Going forward, any bonus payments provided to members of the administrative staff will be approved by the board before the funds are disbursed to ensure that duties are adequately segregated. AUDITOR?S COMMENT The budget for the ELC grant submitted to the Tennessee Department of Education did include $63,589 budgeted to Other Student Support ? Bonus Payments; however, the narrative description stated that it included ?SRO?s, Administrators, Director, and other related personnel.? There were no SRO?s paid from this line-item, and the director of schools was not specifically mentioned. Director in this instance could have implied the director of the program administering the grant. The only personnel paid from this budget line were the director of schools and six other administrative staff members. The narrative appears misleading and would not be sufficient to give prior explicit approval for these types of bonuses. The response of the director of schools? quotes Section 200.407 of the Uniform Guidance which provides: " ? the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs." It should be noted the budget submitted for bonus payments was made to the Tennessee Department of Education which is a non-federal entity. The Federal awarding agency for this award is the U.S. Department of Education. Regardless of the matter of whether or was not there was proper approval to pay bonuses, there still must be proper documentation to support that the person was actually entitled to receive the bonus. Uniform Guidance Section 200.430(i) states ?Standards of Documentation of Personnel Expenses. (1) charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must include: ? (vii) Support the distribution of the employee?s salary or wage among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and a non-federal award, an indirect cost activity and a direct cost activity, two or more indirect activities??. The school department has not provided us with any documented evidence to support that these individuals performed any work on this federal award. Without any supporting documentation of actual work performed on the grant by these individuals, we cannot attest these individuals were entitled to receive a bonus. Auditors were told by the former chairman of the Board of Education that he gave verbal approval of the bonuses; however, without any written documentation, we cannot attest that this happened. Furthermore, the former chairman has no authority on his own to approve bonus payments. The Board of Education, as a whole, would need to vote in order to grant such approval. As mentioned in the finding, the board of education did approve a budget amendment on February 1, 2022. However, it is important to note that this amendment occurred approximately seven months after the bonuses were paid and makes no mention of bonuses being paid to anyone or the amounts these individuals received. The explanation of the amendment states, ?these funds will be used to reimburse a portion of General Purpose funds already budgeted for line items for? Administrative Financial Staff for salary associated with the responsibilities related to duties under the ELC Grant?? Therefore, from the evidence presented to us, it is not clear that the Board of Education, as a whole, even knew these bonuses were paid until reported in our finding and the budget amendment itself does not provide adequate support for the proper approval of these payments as bonuses. The response of the Board of Education references Section 200.430(b) of the Uniform Guidelines provides: Reasonableness. Compensation for employees engaged in work on Federal awards will be considered reasonable to the extent that it is consistent with that paid for similar work in other activities of the non-Federal entity. While bonuses paid with local funds typically do not require a timesheet, Section 200.430(i) states ?Standards of Documentation of Personnel Expenses. (1) charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed...?, In order for us to determine if these bonuses were reasonable and allowable, there must be documented proof that the administrative personnel receiving the bonuses actually devoted their time to administering the grant. We have not been presented with any documented evidence that the administrative staff spent any time on this grant. Furthermore, these administrative staff members were not paid bonuses for any of the hours they devoted to the other federal grants received by the school department. Therefore, the paying of bonuses associated with the ELC grant was inconsistent with the other grants received by the Board of Education. Additionally, the director of schools is employed through a contract between the director of schools and the board of education for the period January 5, 2021, through June 30, 2023, which states that the duties of the director of schools will generally be performed during normal business hours, but it is expressly agreed that the duties will require her to work during times other than normal business hours. The contract makes no mention of bonuses, and it appears anything beyond normal business hours is already included in her contract amount. Therefore, it is questionable if the director?s contract allows for the payment of a bonus.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Material Weakness/Noncompliance Finding Number: 2022-001 Assistance Listing Number and Title: AL #84.425D COVID-19 ? Education Stabilization Fund Federal Award Identification Number / Year: 2022 Federal Agency: US Department of Education Compliance Requirement: Equipment Pass-Through Entity: Ohio Department of Education Repeat Finding from Prior Audit? No 2 CFR ? 3474.1 gives regulatory effect to the Department of Education for 2 CFR ? 200.313(c) through (d) which require that: (c) Equipment must be used in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award or, when appropriate, under other Federal awards; however, the non-Federal entity must not encumber the equipment without prior approval of the Federal awarding agency. (d) Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: 1. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. 2. A physical inventory of the property must be taken and the results reconciled with the property records at least once every 2 years. 3. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 4. Adequate maintenance procedures must be developed to keep the property in good condition. 5. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures), ESF funds may be used for these purposes. Recipients and subrecipients may use ESF funds to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. In addition, with prior approval by the ED or the pass-through entity, recipients and subrecipients may use ESF funds to purchase real property and perform construction for improvements to land, buildings, or equipment that meet the overall purpose of the ESF program, which is ?to prevent, prepare for, and respond to? the COVID-19 pandemic. In addition to the guidance noted above, the Uniform Guidance at 2 CFR ? 200.407 requires prior written approval from either the Department or the State (Governor or SEA, as applicable) for certain costs, such as the purchase of real property; equipment and other capital expenditures; entertainment costs; and travel costs. The School District failed to properly track assets purchased or improvements completed with ESF (specifically Elementary and Secondary School Emergency Relief or ESSER) funds in their Equipment Inventory System. This resulted in unrecorded assets of approximately $209,788 purchased with ESSER Funds not recorded in the inventory system. This would not allow for proper tracking as required above. This was the result of the School District Treasurer not adding all assets to the system. The School District also did not receive proper approval before the purchase of Phenomenal Aire Units. We recommend the School District Treasurer review the Equipment Inventory System and adjust it to include all assets purchased with ESSER Funds. We further recommend the School District ensure it receives all proper approvals as required for any capital asset expenditures purchased with ESSER funds. Officials? Response: Moving forward the School District Treasurer will make sure and double check all inventory purchased with ESSER Funds are in the inventory system if it is over the capital asset threshold. Also, she will make sure all capital asset expenditures purchased with ESSER funds have proper approval.
Material Weakness/Noncompliance Finding Number: 2022-001 Assistance Listing Number and Title: AL #84.425D COVID-19 ? Education Stabilization Fund Federal Award Identification Number / Year: 2022 Federal Agency: US Department of Education Compliance Requirement: Equipment Pass-Through Entity: Ohio Department of Education Repeat Finding from Prior Audit? No 2 CFR ? 3474.1 gives regulatory effect to the Department of Education for 2 CFR ? 200.313(c) through (d) which require that: (c) Equipment must be used in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award or, when appropriate, under other Federal awards; however, the non-Federal entity must not encumber the equipment without prior approval of the Federal awarding agency. (d) Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: 1. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. 2. A physical inventory of the property must be taken and the results reconciled with the property records at least once every 2 years. 3. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 4. Adequate maintenance procedures must be developed to keep the property in good condition. 5. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures), ESF funds may be used for these purposes. Recipients and subrecipients may use ESF funds to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. In addition, with prior approval by the ED or the pass-through entity, recipients and subrecipients may use ESF funds to purchase real property and perform construction for improvements to land, buildings, or equipment that meet the overall purpose of the ESF program, which is ?to prevent, prepare for, and respond to? the COVID-19 pandemic. In addition to the guidance noted above, the Uniform Guidance at 2 CFR ? 200.407 requires prior written approval from either the Department or the State (Governor or SEA, as applicable) for certain costs, such as the purchase of real property; equipment and other capital expenditures; entertainment costs; and travel costs. The School District failed to properly track assets purchased or improvements completed with ESF (specifically Elementary and Secondary School Emergency Relief or ESSER) funds in their Equipment Inventory System. This resulted in unrecorded assets of approximately $209,788 purchased with ESSER Funds not recorded in the inventory system. This would not allow for proper tracking as required above. This was the result of the School District Treasurer not adding all assets to the system. The School District also did not receive proper approval before the purchase of Phenomenal Aire Units. We recommend the School District Treasurer review the Equipment Inventory System and adjust it to include all assets purchased with ESSER Funds. We further recommend the School District ensure it receives all proper approvals as required for any capital asset expenditures purchased with ESSER funds. Officials? Response: Moving forward the School District Treasurer will make sure and double check all inventory purchased with ESSER Funds are in the inventory system if it is over the capital asset threshold. Also, she will make sure all capital asset expenditures purchased with ESSER funds have proper approval.
U.S. Department of Education 2022-005: Unallowable Costs Federal Agency: Department of Education Federal Program: COVID-19 Higher Education Emergency Relief Funds (HEERF)/Coronavirus Aid, Relief and Economic Security (CARES) Act ? Institutional Portion Assistance Listing Number: 84.425F Federal Award Identification Number and Year: P425F204159 - 2022 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: The Uniform Guidance Cost Principles described in 2 CFR Part 200, Subpart E, apply to the HEERF subprogram. Institutions generally have broad uses of funds. Some items of cost in Subpart E of the Uniform Guidance require prior approval under 2 CFR section 200.407 by ED. However, in its HEERF II FAQs published on January 14, 2021, and HEERF III FAQs published on May 11, 2021, ED waived prior approval for certain items of cost (as described in questions 20 and 45, respectively). Specifically, the HEERF grant funds must not be used for construction or purchase of real property. In addition, 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations and program compliance requirements. Condition: The District used grants fund for construction costs that were identified as delays, labor rate escalation and supply chain issues related to COVID-19. Questioned Costs: $614,352 Context: The District expended $5,888,620 in HEERF ? Institutional Portion funds for direct costs, lost revenue and bad debt write off during the fiscal year. Cause: Costs were identified on invoices and changes orders as COVID-19 related. The District had interpreted delayed costs related to COVID-19 as allowable. Effect: Noncompliance with allowable cost principles. Repeat Finding: This was not a finding in the prior year. Recommendation: Implement procedures to ensure all grant expenditures are reviewed by fiscal management for additional review. Views of responsible officials: Management concurs with the finding and plans to correct the finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
2022-003 Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, time and effort was not supported for one transaction for the amount charged to the grant. Context: Of the general disbursement population, $121,199 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $120,483 were booked via unsupported journal entry (allocated). Lastly, one of the forty payroll transactions tested did not agree to the amount charged to the grant. Questioned Costs: $241,682 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Assistance Listing Number: 93.575 Award Period: July 1, 2020 to June 30, 2021 Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, time and effort documentation for actual time incurred should be maintained for payroll charges to the grant. Context: Of the general disbursement population, $67,985 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $87,777 were booked via unsupported journal entry (allocated). Questioned Costs: $155,762 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: N/A Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.