2024-003 Controls over Payroll (Material Weakness in Internal Controls over Compliance and Material Noncompliance) Title: Research and Development Cluster Funding Agency, Federal Award, Agreement Number, Award Year, Assistance Listing Number: National Science Foundation, 2122108, 2024,47.049 National Science Foundation, 1953487, 2024,47.076 United States Department of Education, P031C160248, 2024, 84.031C United States Department of Health and Human Services, 1R16GM146669-01 & Q02067J, 2024, 93.859 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013, 23-DG-11030000-014 Award Year:2024 Assistance Listing Number:10.694 Title: Foster Care-Title IV-E Funding Agency: United States Department of Health and Human Services Federal Award Agreement Number:N/A Award Year:2024 Assistance Listing Number:93.658 Pass-Through Agency:CYFD Pass-Through Identification Number:23-690-500-25581 Condition: In testing 25 payroll items from each program listed above, CRI noted exceptions as described in the following table. No exceptions were noted in the items tested for the Foster Care program. (See table in report pg 120) Questioned Costs: Known and likely questioned costs of $4,547 and $506,209 are associated with the R&D Cluster related to discrepancies in time and effort documentation. No questioned costs were noted in the Southwest Forest Health and Wildfire Prevention Program or the Foster Care program. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.430 – Compensation – personal services, paragraph (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: The University does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. The University has deficiencies recording and processing payroll as described in finding 2024-001. Effect: The University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency.
2024-003 Controls over Payroll (Material Weakness in Internal Controls over Compliance and Material Noncompliance) Title: Research and Development Cluster Funding Agency, Federal Award, Agreement Number, Award Year, Assistance Listing Number: National Science Foundation, 2122108, 2024,47.049 National Science Foundation, 1953487, 2024,47.076 United States Department of Education, P031C160248, 2024, 84.031C United States Department of Health and Human Services, 1R16GM146669-01 & Q02067J, 2024, 93.859 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013, 23-DG-11030000-014 Award Year:2024 Assistance Listing Number:10.694 Title: Foster Care-Title IV-E Funding Agency: United States Department of Health and Human Services Federal Award Agreement Number:N/A Award Year:2024 Assistance Listing Number:93.658 Pass-Through Agency:CYFD Pass-Through Identification Number:23-690-500-25581 Condition: In testing 25 payroll items from each program listed above, CRI noted exceptions as described in the following table. No exceptions were noted in the items tested for the Foster Care program. (See table in report pg 120) Questioned Costs: Known and likely questioned costs of $4,547 and $506,209 are associated with the R&D Cluster related to discrepancies in time and effort documentation. No questioned costs were noted in the Southwest Forest Health and Wildfire Prevention Program or the Foster Care program. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.430 – Compensation – personal services, paragraph (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: The University does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. The University has deficiencies recording and processing payroll as described in finding 2024-001. Effect: The University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency.
2024-003 Controls over Payroll (Material Weakness in Internal Controls over Compliance and Material Noncompliance) Title: Research and Development Cluster Funding Agency, Federal Award, Agreement Number, Award Year, Assistance Listing Number: National Science Foundation, 2122108, 2024,47.049 National Science Foundation, 1953487, 2024,47.076 United States Department of Education, P031C160248, 2024, 84.031C United States Department of Health and Human Services, 1R16GM146669-01 & Q02067J, 2024, 93.859 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013, 23-DG-11030000-014 Award Year:2024 Assistance Listing Number:10.694 Title: Foster Care-Title IV-E Funding Agency: United States Department of Health and Human Services Federal Award Agreement Number:N/A Award Year:2024 Assistance Listing Number:93.658 Pass-Through Agency:CYFD Pass-Through Identification Number:23-690-500-25581 Condition: In testing 25 payroll items from each program listed above, CRI noted exceptions as described in the following table. No exceptions were noted in the items tested for the Foster Care program. (See table in report pg 120) Questioned Costs: Known and likely questioned costs of $4,547 and $506,209 are associated with the R&D Cluster related to discrepancies in time and effort documentation. No questioned costs were noted in the Southwest Forest Health and Wildfire Prevention Program or the Foster Care program. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.430 – Compensation – personal services, paragraph (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: The University does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. The University has deficiencies recording and processing payroll as described in finding 2024-001. Effect: The University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency.
2024-003 Controls over Payroll (Material Weakness in Internal Controls over Compliance and Material Noncompliance) Title: Research and Development Cluster Funding Agency, Federal Award, Agreement Number, Award Year, Assistance Listing Number: National Science Foundation, 2122108, 2024,47.049 National Science Foundation, 1953487, 2024,47.076 United States Department of Education, P031C160248, 2024, 84.031C United States Department of Health and Human Services, 1R16GM146669-01 & Q02067J, 2024, 93.859 Title: Southwest Forest Health and Wildfire Prevention Funding Agency: United States Department of Agriculture Federal Award Agreement Number:21-DG-11030000-020, 22-DG-11030000-013, 23-DG-11030000-014 Award Year:2024 Assistance Listing Number:10.694 Title: Foster Care-Title IV-E Funding Agency: United States Department of Health and Human Services Federal Award Agreement Number:N/A Award Year:2024 Assistance Listing Number:93.658 Pass-Through Agency:CYFD Pass-Through Identification Number:23-690-500-25581 Condition: In testing 25 payroll items from each program listed above, CRI noted exceptions as described in the following table. No exceptions were noted in the items tested for the Foster Care program. (See table in report pg 120) Questioned Costs: Known and likely questioned costs of $4,547 and $506,209 are associated with the R&D Cluster related to discrepancies in time and effort documentation. No questioned costs were noted in the Southwest Forest Health and Wildfire Prevention Program or the Foster Care program. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.430 – Compensation – personal services, paragraph (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: The University does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. The University has deficiencies recording and processing payroll as described in finding 2024-001. Effect: The University may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the Grantor agency.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2022-2023, 2023-2024 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context An effective internal control system was not designed or implemented at the School Corporation related to food service management company claims, food service payroll benefit claims, and food service payroll to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Food Service Management Company The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into a cost reimbursement contract, dated July 1, 2020, with a food service management company (FSMC). Four invoices for payment to the FSMC, which totaled $885,477, were selected for testing. Supporting documentation was presented for only $760,332 of the costs invoiced. Due to the lack of supporting documentation, the Indiana State Board of Accounts was unable to determine if the remaining costs paid, $125,145, were allowable expenditures. The costs that were not properly documented were considered questioned costs. Additionally, in the supporting documentation presented for audit, sales tax was erroneously paid totaling $862. These unallowable costs were considered questioned costs. Payroll In fiscal year 2023-2024, the School Corporation's CTE Coordinator was assigned a new role, Food Service Director/Inventory Coordinator, which included compensation paid out of the Child Nutrition Cluster grant funds. The new role began in May 2024. The Food Service Director did not maintain documentation of time spent on federal program and nonfederal program activities. The total paid to the Food Service Director from the School Lunch fund without proper documentation was $4,358. The costs that were not properly documented were considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in a manner suitable for contract cost determination and verification; INDIANA STATE BOARD OF ACCOUNTS 22 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: INDIANA STATE BOARD OF ACCOUNTS 23 GARY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls over the invoices paid to the FSMC and payroll paid to the Food Service Director were not properly designed or implemented by management. The School Corporation did not receive complete documentation from the FSMC to support the amounts invoiced and did not ensure the Food Service Director maintained a record of actual time spent on child nutrition duties. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs and could result in the repayment of federal funds. Questioned Costs Known questioned costs of $130,365 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management design and implement a system of internal controls to ensure that disbursement documentation will be obtained, retained, and made available for audit and that the disbursements comply with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Significant Deficiencies 2024-001. Payroll (Allowable Costs/Cost Principles) United States Department of Education, Passed-through New York State Department of Education: Special Education Cluster: Special Education Grants to States ALN: 84.027 Criteria: Salaries and wages charged to Federal awards must be supported by documentation prescribed by the Uniform Guidance at Subpart I, 2 CFR §200.430. Condition: Subpart I, 2 CFR §200.430 of the Uniform Guidance requires that charges to “Federal awards for salaries and wages must be based on records that accurately reflect the performed. The documentation should support the distribution of the employee’s compensation among specific activities if the employees work on more than one Federal award, or a Federal award and non-Federal award. The preparation of personnel activation reports (PAR) or periodic certifications or the equivalent is the most effective way to comply with this requirement. During the current year, it was noted that in some instances, the District’s payroll verification forms were either not reviewed or signed by either the employer and employee, and they did not accurately reflect the actual allocation that was charged to the grant in order to comply with Subpart I, 2 CFR §200.430. Cause: Employee PAR forms should accurately reflect time and effort, as described in Subpart I, 2 CFR §200.430, to support salaries, and other forms of compensation charged to a federal program. During our audit testing, we noted that some of the District’s payroll verification forms did not indicate the correct amount or percentage allocation for the employee that was charged to the grant, and there were some instances where the District’s payroll verification forms were not signed off by either the employer or employee. See Context below for more specifics. Effect: Noncompliance could result in the incorrect amount for services rendered being charged to the Federal awards. Questioned Costs: None reported. Context: For the Special Education Cluster, based on a sample of seven (7) employees, we noted that all seven (7) employee payroll verification forms did not accurately reflect the amount charged to the grant, and in two (2) instances we noted the employee payroll verification forms were not signed by either the employer or employee. Recommendation: The District should prepare and maintain the appropriate documentation to support salaries and wages charged to Federal awards in accordance with the requirements of the Uniform Guidance at Subpart I, 2 CFR §200.430. In addition, the District must ensure that all payroll verification forms are properly signed by both the employer and the employee. Views of Responsible Officials of Auditee: The District acknowledges the finding and will thoroughly review and maintain the federal personnel activity reports to ensure each employee’s salary, or other forms of compensation, are properly approved and signed off by both the employer and employee. Additionally, the District will ensure that the amount charged to the grant corresponds to the federal program to which the employees’ earnings were allocated, based on time and effort, in compliance with Subpart I, 2 CFR §200.430.
Information on the federal program: Subject: Education Stabilization Fund (ESSER) – Internal controls Federal Agency: Department of Education Federal Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.430 states in part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $1,375 (Known questioned costs) Context: For 4 selections, in a sample of 40 payroll transactions, the School Corporation did not have time and effort logs to support the portion of the employees’ time charged to the grant. The employees’ time was split with a non-federal fund; however, the School Corporation did not have support for the allocation of the time charged to the ESSER III fund. The sample amount charged to the grant for split-funded employees without time and effort logs was $1,375. Identification as a repeat finding: No. Recommendation: We recommend management ensure time and effort logs are maintained for all employees not charged at 100% to support work performed and charged to the grant awards. We recommend management establish a documented review by management of time and effort logs to ensure time charged to grant awards is allowable and allocable based on work performed in accordance with grant requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
2024-002 Distribution of Compensation – Compliance and Internal Controls over Allowable Costs and Activities (Material Weakness) Federal Program Information: Funding Agency: U.S. Department of the Treasury FALN: 21.027 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2023-2024 Funding Agency: U.S. Department of Homeland Security FALN: 97.024 Federal Award Identification Numbers: All under this program. See Schedule of Expenditures of Federal Awards. Pass Through Entity: Multiple entities. See Schedule of Expenditures of Federal Awards. Award Year: 2021-2024 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.430(i) compensation records must support the distribution of the employee’s compensation among specific activities or costs objectives if the employee works on more than one Federal award and compensation of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner. Condition: The time and effort spent on the federal program per the timesheets did not support the amounts charged to the 21.027 federal program. Additionally, multiple timesheets were not properly approved for both 21.027 and 97.024 federal programs. Effect: The lack of controls to ensure the correct amounts are charged to the federal program based on the time and effort of the personnel could result in charging unallowable costs to the federal program. Cause: The Association became aware of the requirement to properly maintain documentation to support time and effort per grant during the fiscal year ended June 30, 2024, and was not able to implement proper procedures and controls for the entire fiscal year. Known Questioned Costs: FALN 21.027- $8,414; FALN 97.024 - None Likely Questioned Costs: FALN 21.027- $67,725; FALN 97.024 - None Perspective: This finding represents a systemic problem as it affects both the allowable activities, allowable costs and period of performance requirements. Repeat Finding: No Recommendation: We recommend the Association establish policies and procedures to ensure that compensation is properly documented and distributed between Federal awards and properly approved.
Information on the federal program: Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.430 states in part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For 18 selections, in a sample of 40 payroll transactions, the School Corporation based the employees’ time charged to the grant on an annual time and effort log. The employee’s time was split with a non-federal fund. The School Corporation allocated the employee’s time based on a time and effort log completed in September of each year which was reviewed by the Superintendent. The School Corporation did not complete time and effort logs more frequently than annually to ensure the amounts being charged to food service were based on worked performed for each payroll period. Identification as a repeat finding: No. Recommendation: We recommend perform and maintain time and effort logs monthly to support work performed and charged to the grant awards to ensure time charged to grant awards is allowable and allocable based on work performed in accordance with grant requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.430 states in part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For 18 selections, in a sample of 40 payroll transactions, the School Corporation based the employees’ time charged to the grant on an annual time and effort log. The employee’s time was split with a non-federal fund. The School Corporation allocated the employee’s time based on a time and effort log completed in September of each year which was reviewed by the Superintendent. The School Corporation did not complete time and effort logs more frequently than annually to ensure the amounts being charged to food service were based on worked performed for each payroll period. Identification as a repeat finding: No. Recommendation: We recommend perform and maintain time and effort logs monthly to support work performed and charged to the grant awards to ensure time charged to grant awards is allowable and allocable based on work performed in accordance with grant requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.430 states in part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For 18 selections, in a sample of 40 payroll transactions, the School Corporation based the employees’ time charged to the grant on an annual time and effort log. The employee’s time was split with a non-federal fund. The School Corporation allocated the employee’s time based on a time and effort log completed in September of each year which was reviewed by the Superintendent. The School Corporation did not complete time and effort logs more frequently than annually to ensure the amounts being charged to food service were based on worked performed for each payroll period. Identification as a repeat finding: No. Recommendation: We recommend perform and maintain time and effort logs monthly to support work performed and charged to the grant awards to ensure time charged to grant awards is allowable and allocable based on work performed in accordance with grant requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
CONDITION North Dakota State University and the University of North Dakota were not certifying payroll expenditures by the deadlines stated in their payroll certification policies. We noted 7 out of 40 payroll checks tested had payroll expenditures for that semester that wasn't certified in a timely manner. This resulted in unapproved payroll expenditures of $74,051 being charged to the Research and Development Cluster. When projected against the entire population, the additional likely questioned cost totaled $13,998,284. CRITERIA In 2 CFR 200.430 compensation-personal services part (g) (i) when discussing Standards for Documentation of Personnel Expenses states in part, “be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated." The North Dakota State University's overview of Effort Reporting states in part that North Dakota State University has three effort reporting periods which follow the University’s semester schedule: August 16 – December 31, January 1 – May 15, May 16 – August 15. Approximately 15 days after each effort reporting period, the Grant and Contract Office will generate effort certification reports which are to be reviewed, signed, and returned within 30 days after the department receives them. The University of North Dakota's Sponsored Project Payroll Confirmation policy states in part that at the end of each semester, after payroll posts (on or about January 15, May 31, and August 31) compliance coordinators (CC) will receive an email notifying them the pre review period has opened. It goes on to state to be considered complete, the Project Payroll Statement (PPS) must be: • Pre-review by the primary CC or other non-primary CC as assigned. • Certified by the project principal investigator or their delegate as assigned. Only after both steps are accomplished is the PPS considered complete. If statements are not completed by 30 days after the end of 90-day certification period, Grants & Contracts will transfer federal salary charges corresponding to the incomplete statement to a department fund. The University of North Dakota's 'Guidelines for Effort Commitment & Payroll Certification Associated with Sponsored Projects' states in part that in general, payroll must be certified within 90 days of the date on which the certification window opens. Payroll must be certified on a semester basis. CAUSE Principal Investigators (PI's) are not understanding the requirements per the North Dakota State University and University of North Dakota policy which state a specific time period in which this task of certifying the payroll should be completed. EFFECT Without timely certification of payroll expenses by the Principal Investigator (PI), there is the potential for erroneous payroll amounts charged to a grant, unallowed payroll amounts charged to a grant, and/or payroll expense charged to the wrong grant, and not detected until it's too late to be corrected. CONTEXT North Dakota State University and the University of North Dakota are not certifying payroll expenses by the deadlines stated in their payroll certification policies. Total payroll expenditures for our audit period ($98,503,735) make up a significant portion of all Research and Development Cluster program expenses ($220,862,918) and thus these late payroll certification issues are a critical noncompliance deviation. Where sampling was performed, the audit used a non-statistical sampling method. IDENTIFICATION AS A REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the North Dakota State University and the University of North Dakota certify their federal payroll expenses in a timely matter to provide reasonable assurance the amounts are accurate, allowable, and properly allocated to the specific project/grant. UNIVERSITY SYSTEM RESPONSE North Dakota State University agrees with the finding. University of North Dakota agrees with the finding. See “Management’s Response and Corrective Action” section of this report.
CONDITION North Dakota State University and the University of North Dakota were not certifying payroll expenditures by the deadlines stated in their payroll certification policies. We noted 7 out of 40 payroll checks tested had payroll expenditures for that semester that wasn't certified in a timely manner. This resulted in unapproved payroll expenditures of $74,051 being charged to the Research and Development Cluster. When projected against the entire population, the additional likely questioned cost totaled $13,998,284. CRITERIA In 2 CFR 200.430 compensation-personal services part (g) (i) when discussing Standards for Documentation of Personnel Expenses states in part, “be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated." The North Dakota State University's overview of Effort Reporting states in part that North Dakota State University has three effort reporting periods which follow the University’s semester schedule: August 16 – December 31, January 1 – May 15, May 16 – August 15. Approximately 15 days after each effort reporting period, the Grant and Contract Office will generate effort certification reports which are to be reviewed, signed, and returned within 30 days after the department receives them. The University of North Dakota's Sponsored Project Payroll Confirmation policy states in part that at the end of each semester, after payroll posts (on or about January 15, May 31, and August 31) compliance coordinators (CC) will receive an email notifying them the pre review period has opened. It goes on to state to be considered complete, the Project Payroll Statement (PPS) must be: • Pre-review by the primary CC or other non-primary CC as assigned. • Certified by the project principal investigator or their delegate as assigned. Only after both steps are accomplished is the PPS considered complete. If statements are not completed by 30 days after the end of 90-day certification period, Grants & Contracts will transfer federal salary charges corresponding to the incomplete statement to a department fund. The University of North Dakota's 'Guidelines for Effort Commitment & Payroll Certification Associated with Sponsored Projects' states in part that in general, payroll must be certified within 90 days of the date on which the certification window opens. Payroll must be certified on a semester basis. CAUSE Principal Investigators (PI's) are not understanding the requirements per the North Dakota State University and University of North Dakota policy which state a specific time period in which this task of certifying the payroll should be completed. EFFECT Without timely certification of payroll expenses by the Principal Investigator (PI), there is the potential for erroneous payroll amounts charged to a grant, unallowed payroll amounts charged to a grant, and/or payroll expense charged to the wrong grant, and not detected until it's too late to be corrected. CONTEXT North Dakota State University and the University of North Dakota are not certifying payroll expenses by the deadlines stated in their payroll certification policies. Total payroll expenditures for our audit period ($98,503,735) make up a significant portion of all Research and Development Cluster program expenses ($220,862,918) and thus these late payroll certification issues are a critical noncompliance deviation. Where sampling was performed, the audit used a non-statistical sampling method. IDENTIFICATION AS A REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the North Dakota State University and the University of North Dakota certify their federal payroll expenses in a timely matter to provide reasonable assurance the amounts are accurate, allowable, and properly allocated to the specific project/grant. UNIVERSITY SYSTEM RESPONSE North Dakota State University agrees with the finding. University of North Dakota agrees with the finding. See “Management’s Response and Corrective Action” section of this report.
CONDITION North Dakota State University and the University of North Dakota were not certifying payroll expenditures by the deadlines stated in their payroll certification policies. We noted 7 out of 40 payroll checks tested had payroll expenditures for that semester that wasn't certified in a timely manner. This resulted in unapproved payroll expenditures of $74,051 being charged to the Research and Development Cluster. When projected against the entire population, the additional likely questioned cost totaled $13,998,284. CRITERIA In 2 CFR 200.430 compensation-personal services part (g) (i) when discussing Standards for Documentation of Personnel Expenses states in part, “be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated." The North Dakota State University's overview of Effort Reporting states in part that North Dakota State University has three effort reporting periods which follow the University’s semester schedule: August 16 – December 31, January 1 – May 15, May 16 – August 15. Approximately 15 days after each effort reporting period, the Grant and Contract Office will generate effort certification reports which are to be reviewed, signed, and returned within 30 days after the department receives them. The University of North Dakota's Sponsored Project Payroll Confirmation policy states in part that at the end of each semester, after payroll posts (on or about January 15, May 31, and August 31) compliance coordinators (CC) will receive an email notifying them the pre review period has opened. It goes on to state to be considered complete, the Project Payroll Statement (PPS) must be: • Pre-review by the primary CC or other non-primary CC as assigned. • Certified by the project principal investigator or their delegate as assigned. Only after both steps are accomplished is the PPS considered complete. If statements are not completed by 30 days after the end of 90-day certification period, Grants & Contracts will transfer federal salary charges corresponding to the incomplete statement to a department fund. The University of North Dakota's 'Guidelines for Effort Commitment & Payroll Certification Associated with Sponsored Projects' states in part that in general, payroll must be certified within 90 days of the date on which the certification window opens. Payroll must be certified on a semester basis. CAUSE Principal Investigators (PI's) are not understanding the requirements per the North Dakota State University and University of North Dakota policy which state a specific time period in which this task of certifying the payroll should be completed. EFFECT Without timely certification of payroll expenses by the Principal Investigator (PI), there is the potential for erroneous payroll amounts charged to a grant, unallowed payroll amounts charged to a grant, and/or payroll expense charged to the wrong grant, and not detected until it's too late to be corrected. CONTEXT North Dakota State University and the University of North Dakota are not certifying payroll expenses by the deadlines stated in their payroll certification policies. Total payroll expenditures for our audit period ($98,503,735) make up a significant portion of all Research and Development Cluster program expenses ($220,862,918) and thus these late payroll certification issues are a critical noncompliance deviation. Where sampling was performed, the audit used a non-statistical sampling method. IDENTIFICATION AS A REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the North Dakota State University and the University of North Dakota certify their federal payroll expenses in a timely matter to provide reasonable assurance the amounts are accurate, allowable, and properly allocated to the specific project/grant. UNIVERSITY SYSTEM RESPONSE North Dakota State University agrees with the finding. University of North Dakota agrees with the finding. See “Management’s Response and Corrective Action” section of this report.
CONDITION North Dakota State University and the University of North Dakota were not certifying payroll expenditures by the deadlines stated in their payroll certification policies. We noted 7 out of 40 payroll checks tested had payroll expenditures for that semester that wasn't certified in a timely manner. This resulted in unapproved payroll expenditures of $74,051 being charged to the Research and Development Cluster. When projected against the entire population, the additional likely questioned cost totaled $13,998,284. CRITERIA In 2 CFR 200.430 compensation-personal services part (g) (i) when discussing Standards for Documentation of Personnel Expenses states in part, “be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated." The North Dakota State University's overview of Effort Reporting states in part that North Dakota State University has three effort reporting periods which follow the University’s semester schedule: August 16 – December 31, January 1 – May 15, May 16 – August 15. Approximately 15 days after each effort reporting period, the Grant and Contract Office will generate effort certification reports which are to be reviewed, signed, and returned within 30 days after the department receives them. The University of North Dakota's Sponsored Project Payroll Confirmation policy states in part that at the end of each semester, after payroll posts (on or about January 15, May 31, and August 31) compliance coordinators (CC) will receive an email notifying them the pre review period has opened. It goes on to state to be considered complete, the Project Payroll Statement (PPS) must be: • Pre-review by the primary CC or other non-primary CC as assigned. • Certified by the project principal investigator or their delegate as assigned. Only after both steps are accomplished is the PPS considered complete. If statements are not completed by 30 days after the end of 90-day certification period, Grants & Contracts will transfer federal salary charges corresponding to the incomplete statement to a department fund. The University of North Dakota's 'Guidelines for Effort Commitment & Payroll Certification Associated with Sponsored Projects' states in part that in general, payroll must be certified within 90 days of the date on which the certification window opens. Payroll must be certified on a semester basis. CAUSE Principal Investigators (PI's) are not understanding the requirements per the North Dakota State University and University of North Dakota policy which state a specific time period in which this task of certifying the payroll should be completed. EFFECT Without timely certification of payroll expenses by the Principal Investigator (PI), there is the potential for erroneous payroll amounts charged to a grant, unallowed payroll amounts charged to a grant, and/or payroll expense charged to the wrong grant, and not detected until it's too late to be corrected. CONTEXT North Dakota State University and the University of North Dakota are not certifying payroll expenses by the deadlines stated in their payroll certification policies. Total payroll expenditures for our audit period ($98,503,735) make up a significant portion of all Research and Development Cluster program expenses ($220,862,918) and thus these late payroll certification issues are a critical noncompliance deviation. Where sampling was performed, the audit used a non-statistical sampling method. IDENTIFICATION AS A REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the North Dakota State University and the University of North Dakota certify their federal payroll expenses in a timely matter to provide reasonable assurance the amounts are accurate, allowable, and properly allocated to the specific project/grant. UNIVERSITY SYSTEM RESPONSE North Dakota State University agrees with the finding. University of North Dakota agrees with the finding. See “Management’s Response and Corrective Action” section of this report.
Criteria – 2 CFR §200.430(g) – Standards for Documentation of Personnel Expenses require that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and are supported by a system of internal control which provides reasonable assurance that charges are accurate, allowable, and properly allocated. Estimates determined before services are performed do not qualify as support. Condition/context – A sample of 9 payroll expenditures was selected for testing. The total population of payroll expenditures charged to the food distribution cluster grants was $1,396,059. For all 9 selections, the Organization was unable to provide evidence of actual time spent on each grant. The Organization allocates personnel expenses to federal awards using estimates, not records that accurately reflect the work performed. The Organization estimates how much time each employee spends on activities allowable for each grant, but these estimates are not supported by records that reflect the work performed. The Organization has an electronic timekeeping system, but the system does not track the activities an employee performs. Employees are not required to complete certifications or Personnel Activity Reports (PARs) to support the hours worked on allowable activities. Our sample was not, and was not intended to be, statistically valid. Questioned costs – ALN 10.565 - $8,192, ALN 10.568 - $1,323,021, ALN 10.182 - $64,846 Total questioned costs for all programs – $1,396,059, which is the total payroll expenditures charged to the food distribution cluster grants. Cause/effect – The Organization has not developed a system of internal control which provides reasonable assurance that charges are accurate, allowable, and properly allocated. Personnel expenses charged to federal awards are not supported by records that reflect the work performed. Repeat finding – No. Recommendation – We recommend the Organization establish a system of time and effort reporting that meets the standards for documentation of personnel expenses, and a system of internal control that provides reasonable assurance that the charges are accurate, allowable and properly allocated.
Criteria – 2 CFR §200.430(g) – Standards for Documentation of Personnel Expenses require that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and are supported by a system of internal control which provides reasonable assurance that charges are accurate, allowable, and properly allocated. Estimates determined before services are performed do not qualify as support. Condition/context – A sample of 9 payroll expenditures was selected for testing. The total population of payroll expenditures charged to the food distribution cluster grants was $1,396,059. For all 9 selections, the Organization was unable to provide evidence of actual time spent on each grant. The Organization allocates personnel expenses to federal awards using estimates, not records that accurately reflect the work performed. The Organization estimates how much time each employee spends on activities allowable for each grant, but these estimates are not supported by records that reflect the work performed. The Organization has an electronic timekeeping system, but the system does not track the activities an employee performs. Employees are not required to complete certifications or Personnel Activity Reports (PARs) to support the hours worked on allowable activities. Our sample was not, and was not intended to be, statistically valid. Questioned costs – ALN 10.565 - $8,192, ALN 10.568 - $1,323,021, ALN 10.182 - $64,846 Total questioned costs for all programs – $1,396,059, which is the total payroll expenditures charged to the food distribution cluster grants. Cause/effect – The Organization has not developed a system of internal control which provides reasonable assurance that charges are accurate, allowable, and properly allocated. Personnel expenses charged to federal awards are not supported by records that reflect the work performed. Repeat finding – No. Recommendation – We recommend the Organization establish a system of time and effort reporting that meets the standards for documentation of personnel expenses, and a system of internal control that provides reasonable assurance that the charges are accurate, allowable and properly allocated.
Criteria – 2 CFR §200.430(g) – Standards for Documentation of Personnel Expenses require that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and are supported by a system of internal control which provides reasonable assurance that charges are accurate, allowable, and properly allocated. Estimates determined before services are performed do not qualify as support. Condition/context – A sample of 9 payroll expenditures was selected for testing. The total population of payroll expenditures charged to the food distribution cluster grants was $1,396,059. For all 9 selections, the Organization was unable to provide evidence of actual time spent on each grant. The Organization allocates personnel expenses to federal awards using estimates, not records that accurately reflect the work performed. The Organization estimates how much time each employee spends on activities allowable for each grant, but these estimates are not supported by records that reflect the work performed. The Organization has an electronic timekeeping system, but the system does not track the activities an employee performs. Employees are not required to complete certifications or Personnel Activity Reports (PARs) to support the hours worked on allowable activities. Our sample was not, and was not intended to be, statistically valid. Questioned costs – ALN 10.565 - $8,192, ALN 10.568 - $1,323,021, ALN 10.182 - $64,846 Total questioned costs for all programs – $1,396,059, which is the total payroll expenditures charged to the food distribution cluster grants. Cause/effect – The Organization has not developed a system of internal control which provides reasonable assurance that charges are accurate, allowable, and properly allocated. Personnel expenses charged to federal awards are not supported by records that reflect the work performed. Repeat finding – No. Recommendation – We recommend the Organization establish a system of time and effort reporting that meets the standards for documentation of personnel expenses, and a system of internal control that provides reasonable assurance that the charges are accurate, allowable and properly allocated.
Finding 2024-001: Proper Support for Payroll Cost Allocations Federal Program: Block Grants for Prevention and Treatment of Substance Abuse, 93.959 Federal Agency: U.S Department of Health and Human Services Pass-Through Entity: United Community Services, Inc. Criteria: According to 2 CFR 200.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our audit, we noted that payroll costs for employees working on the Block Grants for Prevention and Treatment of Substance Abuse grants were not charged based on actual hours worked. Instead, payroll was allocated using budgeted estimates with several subsequent adjustments to those allocations to reflect what they believed to be actual time spent on grant- related activities. Cause: The Organization relied on predetermined salary allocations rather than allocating based on the time and effort reporting system that tracks actual hours worked on federal programs as some employees were not properly coding time worked by grant on their time sheets. Effect: Payroll costs charged to the grant may not accurately reflect the time employees spent on grant- related activities, leading to potential unallowable costs and noncompliance with federal regulations. Questioned Costs: Not determined. Recommendation: We recommend that the Organization utilize the time and effort reporting system that ensures payroll costs are charged to federal awards based on actual hours worked and to train employees to properly code their hours. If actual hours are not used, management should review and adjust salary allocations periodically to align with documented time records.Views of Responsible Officials: Additional and ongoing training on entering time will be done with employees. Additional and ongoing training on reviewing and approving time will be done with supervisors. An additional level of checking will be done each month by someone other than the supervisor. Additional reporting capabilities are being programmed into Employee & Family Resources, Inc.'s time keeping system to help with this.
Finding 2024-001: Proper Support for Payroll Cost Allocations Federal Program: Block Grants for Prevention and Treatment of Substance Abuse, 93.959 Federal Agency: U.S Department of Health and Human Services Pass-Through Entity: United Community Services, Inc. Criteria: According to 2 CFR 200.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our audit, we noted that payroll costs for employees working on the Block Grants for Prevention and Treatment of Substance Abuse grants were not charged based on actual hours worked. Instead, payroll was allocated using budgeted estimates with several subsequent adjustments to those allocations to reflect what they believed to be actual time spent on grant- related activities. Cause: The Organization relied on predetermined salary allocations rather than allocating based on the time and effort reporting system that tracks actual hours worked on federal programs as some employees were not properly coding time worked by grant on their time sheets. Effect: Payroll costs charged to the grant may not accurately reflect the time employees spent on grant- related activities, leading to potential unallowable costs and noncompliance with federal regulations. Questioned Costs: Not determined. Recommendation: We recommend that the Organization utilize the time and effort reporting system that ensures payroll costs are charged to federal awards based on actual hours worked and to train employees to properly code their hours. If actual hours are not used, management should review and adjust salary allocations periodically to align with documented time records.Views of Responsible Officials: Additional and ongoing training on entering time will be done with employees. Additional and ongoing training on reviewing and approving time will be done with supervisors. An additional level of checking will be done each month by someone other than the supervisor. Additional reporting capabilities are being programmed into Employee & Family Resources, Inc.'s time keeping system to help with this.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
Significant Deficiency Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Assistance Listing: 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.027/84.027X/84.173/84.173X – Special Education Cluster (IDEA) Repeat Finding: Yes Criteria: Section 2 CFR 200 and other federal regulations require that payroll expenditures for a grant be documented with accurate records reflecting the work performed by each employee. This includes maintaining time sheets, pay stubs, and other payroll records to ensure charges are allowable, accurate, and properly allocated to the specific grant. These records must be kept for at least three years after the final financial report is submitted. Subgrantees must also ensure that employees paid with federal funds maintain time distribution records, known as time and effort reports. Specifically, Section 200.430 states: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated. Condition: The District’s its present internal control policies and procedures are not sufficient to ensure compliance with controls contained in the District’s Federal Programs Procedural Handbook as well as requirements contained in Section 2 CFR 200. As a result of our statistically valid random sample of forty payroll disbursements included in grant expenditures for the major federal programs, we observed the following: One instance where the salary approved by the board was more than the salary paid to the employee. One instance where an employee’s time sheets were not approved by their direct supervisor. Six instances where we were unable to observe the required semi-annual certifications for employees working under a single cost objective. Two instances where we were unable to observe pro-rated timesheets for employees that work on multiple cost objectives. Context/ Perspective: This finding is a result of our statistically valid random sample of forty payroll cash disbursements for single audit purposes. Cause: The cause is likely a failure to monitor and fulfill the District’s present internal controls. Effect: Failure to follow the federal requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls to ensure that the District maintains the required payroll documentation as well as the required semi-annual certifications necessary for employees who work on a single cost objective and are paid through federal grants and prorated timesheets that are necessary for employees who work on multiple cost objectives. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
2024-002 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education Special Education Cluster (IDEA) – ALN 84.027 & 84.173 COVID-19 – Special Education Cluster (IDEA) – ALN 84.027X Compliance Finding and Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR 200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Semi-annual or monthly time and effort certifications are to be utilized if the non-federal entity’s records do not meet the related standards described in the Uniform Guidance. Condition: Time and effort certifications were not maintained for grant employees. Cause: The School was not aware of the applicable time and effort requirements. Effect: The School is not in compliance with applicable cost principles related to salaries and wages. Questioned Costs: $297,656 Repeat Finding from Prior Year: No. Recommendation: The School should implement procedures to maintain time and effort certifications for all grant employees. Views of Responsible Official: Management agrees with the finding.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.