Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.
Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.
Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.
Finding No. 2022-004 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.403 Consolidated Grants to the Outlying Areas Area: Allowable Costs/Cost Principles Questioned Costs: $28,975 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented to be considered allowable under Federal awards. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 25 (or 63%) of 40 transactions tested, aggregating $39,942 out of $4,631,757 in total payroll expenditures, the Notice of Personnel Action (NOPA) form was not provided for differential payments paid to employees. See Schedule of Findings and Questioned Costs for chart/table. Condition, continued: 2. For 2 (or 40%), no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-049031-US and PS-055730-US, which were acquired within fiscal year 2022, totaling $14,299. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $28,975. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with Condition 1. Management agrees with Condition 2. Auditor response: Condition 1 – Part T60-30.1-448 (Approval of Proposals to Provide Premium Pay or Differentials) of the PSS Personnel Rules and Regulations states that all proposals for pay differentials as defined herein shall be submitted by the Commissioner of Education on a request for personnel action (form CSC P 1) to the Personnel Management Officer for review and approval. The request must be accompanied by a letter of justification addressing each of the criteria required to support the particular differential. PSS is in noncompliance with its personnel rules and regulations as it failed to provide documentation supporting a request for personnel action, which is determined to be the NOPA for these instances. The NOPA also determines whether the employee is validly employed at date of payment of the differential. The condition remains.
Finding No. 2022-005 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: COVID-19 84.425 Education Stabilization Fund ED Subprogram: 84.425A Education Stabilization Fund – State Educational Agency (Outlying Areas; 84.425X American Rescue Plan – State Agency Educational Agency (Outlying Areas) Federal Award No.: COVID-19 S425A200001, COVID-19 S425X210001 Area: Allowable Costs/Cost Principles Questioned Costs: $246,285 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(a) provides that costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto. 2 CFR 200.403 (g) also provides that costs must be adequately documented. In an e-mail communication to PSS, U.S. Department of Education (ED) had stated that the proposed use of ESF funds for the purpose of paying a 10% retention incentive in response to the COVID-19 pandemic is allowable. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was higher by $802,789 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under ALN 84.027 but were later reclassified to ALN 84.425A through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. Condition, continued 2. For 2 (or 5%) of 40 payroll transactions tested, totaling $58,493 out of $32,152,897 in total gross wages incurred under the program, the employee was paid a retention incentive amounting to $3,000 instead of 10% of the employee’s annual salary, as provided by the retention incentive policy. We further noted that PSS provided fixed retention incentive payments amounting to $3,000 for employees whose annual salaries amounted to $30,000 and below, instead of using the rate of 10% as allowed by ED. No evidence was provided to justify the allowability of retention incentives in excess of the allowable amount for the aforementioned group of employees. Total known questioned costs for this condition amounted to $236,490 under ALN 84.425X. Below is a computation of the excess incentive amount for employees actively employed at fiscal year-end: See Schedule of Findings and Questioned Costs for chart/table. 3. For 1 (or 10%), no evidence of prior approval from the federal agency was provided for equipment acquisition PS-069896-US, which was acquired within fiscal year 2022 amounting to $9,795. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Total known questioned costs of $246,285 are reported. Identification as a repeat finding: 2021-003 Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings described in Conditions 1 and 2. Management agrees with Condition 3. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – A review of the communications between PSS and the U.S. Department of Education shows the latter’s approval to provide a retention incentive of 10% of annual salaries. There was no specific approval on the fixed amount of retention incentive provided for those employees with annual salaries not exceeding $30,000. The condition remains.
Finding No. 2022-005 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: COVID-19 84.425 Education Stabilization Fund ED Subprogram: 84.425A Education Stabilization Fund – State Educational Agency (Outlying Areas; 84.425X American Rescue Plan – State Agency Educational Agency (Outlying Areas) Federal Award No.: COVID-19 S425A200001, COVID-19 S425X210001 Area: Allowable Costs/Cost Principles Questioned Costs: $246,285 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(a) provides that costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto. 2 CFR 200.403 (g) also provides that costs must be adequately documented. In an e-mail communication to PSS, U.S. Department of Education (ED) had stated that the proposed use of ESF funds for the purpose of paying a 10% retention incentive in response to the COVID-19 pandemic is allowable. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was higher by $802,789 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under ALN 84.027 but were later reclassified to ALN 84.425A through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. Condition, continued 2. For 2 (or 5%) of 40 payroll transactions tested, totaling $58,493 out of $32,152,897 in total gross wages incurred under the program, the employee was paid a retention incentive amounting to $3,000 instead of 10% of the employee’s annual salary, as provided by the retention incentive policy. We further noted that PSS provided fixed retention incentive payments amounting to $3,000 for employees whose annual salaries amounted to $30,000 and below, instead of using the rate of 10% as allowed by ED. No evidence was provided to justify the allowability of retention incentives in excess of the allowable amount for the aforementioned group of employees. Total known questioned costs for this condition amounted to $236,490 under ALN 84.425X. Below is a computation of the excess incentive amount for employees actively employed at fiscal year-end: See Schedule of Findings and Questioned Costs for chart/table. 3. For 1 (or 10%), no evidence of prior approval from the federal agency was provided for equipment acquisition PS-069896-US, which was acquired within fiscal year 2022 amounting to $9,795. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Total known questioned costs of $246,285 are reported. Identification as a repeat finding: 2021-003 Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings described in Conditions 1 and 2. Management agrees with Condition 3. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – A review of the communications between PSS and the U.S. Department of Education shows the latter’s approval to provide a retention incentive of 10% of annual salaries. There was no specific approval on the fixed amount of retention incentive provided for those employees with annual salaries not exceeding $30,000. The condition remains.
Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.
Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.
Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBERS 84.425D and 84.425U PASS-THROUGH NUMBER 6004 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 2022-001. Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of equipment purchases from the COVID-19 - Education Stabilization Fund, we identified the purchase of two pieces of equipment with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $13,797 were paid from the COVID-19 - Education Stabilization Fund. Questioned costs: The amount of questioned costs was $13,797. Context: We examined all capital expenditures of the COVID-19 Education Stabilization Fund totaling $1,262,158. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education for guidance regarding this matter and implement proper controls over program expenditures.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBERS 84.425D AND 84.425U PASS-THROUGH NUMBER 0406 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 2022-001. Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the prior written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: During our examination of expenditures from the COVID-19 Education Stabilization Fund, we identified a facilities improvement purchase and an equipment purchase with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. These purchases had a total cost of $15,204. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $15,204 were paid from COVID-19 - Education Stabilization Fund. Questioned costs: The amount of questioned costs was $15,204. Context: We examined all capital expenditures of the COVID-19 - Education Stabilization Fund totaling $75,927. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The ESSER Coordinator, Shane Patrick, Assistant Superintendent of Operations and the Chief Financial Officer, Terri Raskiewicz, are reviewing all actual expenses that pertain to COVID-19-Education Stabilization Fund. Shane Patrick did reach out to DESE and DESE provided our district with a letter stating these expenses would have been approved had we sent in a justification form. This item was approved by DESE in our overall ESSER plan.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBERS 84.425D AND 84.425U PASS-THROUGH NUMBER 0406 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 2022-001. Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the prior written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: During our examination of expenditures from the COVID-19 Education Stabilization Fund, we identified a facilities improvement purchase and an equipment purchase with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. These purchases had a total cost of $15,204. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $15,204 were paid from COVID-19 - Education Stabilization Fund. Questioned costs: The amount of questioned costs was $15,204. Context: We examined all capital expenditures of the COVID-19 - Education Stabilization Fund totaling $75,927. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The ESSER Coordinator, Shane Patrick, Assistant Superintendent of Operations and the Chief Financial Officer, Terri Raskiewicz, are reviewing all actual expenses that pertain to COVID-19-Education Stabilization Fund. Shane Patrick did reach out to DESE and DESE provided our district with a letter stating these expenses would have been approved had we sent in a justification form. This item was approved by DESE in our overall ESSER plan.
FINDING 2022-002 EDUCATION STABILIZATION FUND (50000) Federal Agency: U.S. Department of Education Pass through Entity: California Department of Education Program Names: Elementary and Secondary School Emergency Relief I, II, III (ESSER, ESSER II, ESSER III) (Assistance Listing 84.425, D, U) Criteria: Consistent with 2CFR Section 200.311 (real property), Section 200.313 (equipment), and Section 200.439 (equipment and other capital expenditures) Education Stabilization Funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by the Department of Education or the pass-through entity. Condition: The District purchased numerous equipment items above the capital threshold for federal purchases but did not obtain approval from the California Department of Education. Questioned Costs: Purchases totaling $329,699.90 were made for equipment above the capital threshold without CDE approval. Context: The finding is limited to purchases above the capital threshold requiring approval. This is not a repeat finding. Cause: The District was unaware of the requirement. Effect: The funds spent on this purchase may be subject to review or return to the awarding agency. Recommendation: We recommend the District submit requests for approval for the equipment or find another allowable funding source for the purchases. CDE has stated that it will accept requests after the fact. Views of responsible officials: Staff and management will ensure that the District submits requests for approval for capital expenditures from the California Department of Education prior to purchases.
FINDING 2022-002 EDUCATION STABILIZATION FUND (50000) Federal Agency: U.S. Department of Education Pass through Entity: California Department of Education Program Names: Elementary and Secondary School Emergency Relief I, II, III (ESSER, ESSER II, ESSER III) (Assistance Listing 84.425, D, U) Criteria: Consistent with 2CFR Section 200.311 (real property), Section 200.313 (equipment), and Section 200.439 (equipment and other capital expenditures) Education Stabilization Funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by the Department of Education or the pass-through entity. Condition: The District purchased numerous equipment items above the capital threshold for federal purchases but did not obtain approval from the California Department of Education. Questioned Costs: Purchases totaling $329,699.90 were made for equipment above the capital threshold without CDE approval. Context: The finding is limited to purchases above the capital threshold requiring approval. This is not a repeat finding. Cause: The District was unaware of the requirement. Effect: The funds spent on this purchase may be subject to review or return to the awarding agency. Recommendation: We recommend the District submit requests for approval for the equipment or find another allowable funding source for the purchases. CDE has stated that it will accept requests after the fact. Views of responsible officials: Staff and management will ensure that the District submits requests for approval for capital expenditures from the California Department of Education prior to purchases.
FINDING 2022-002 EDUCATION STABILIZATION FUND (50000) Federal Agency: U.S. Department of Education Pass through Entity: California Department of Education Program Names: Elementary and Secondary School Emergency Relief I, II, III (ESSER, ESSER II, ESSER III) (Assistance Listing 84.425, D, U) Criteria: Consistent with 2CFR Section 200.311 (real property), Section 200.313 (equipment), and Section 200.439 (equipment and other capital expenditures) Education Stabilization Funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by the Department of Education or the pass-through entity. Condition: The District purchased numerous equipment items above the capital threshold for federal purchases but did not obtain approval from the California Department of Education. Questioned Costs: Purchases totaling $329,699.90 were made for equipment above the capital threshold without CDE approval. Context: The finding is limited to purchases above the capital threshold requiring approval. This is not a repeat finding. Cause: The District was unaware of the requirement. Effect: The funds spent on this purchase may be subject to review or return to the awarding agency. Recommendation: We recommend the District submit requests for approval for the equipment or find another allowable funding source for the purchases. CDE has stated that it will accept requests after the fact. Views of responsible officials: Staff and management will ensure that the District submits requests for approval for capital expenditures from the California Department of Education prior to purchases.
FINDING 2022-002: EDUCATION STABILIZATION FUND DISCRETIONARY GRANTS? EQUIPMENT AND REAL PROPERTY MANAGEMENT (50000 & 30000) CFDA Number and Title: 84.425 and 84.425C - Education Stabilization Fund Discretionary Grants: Governor's Emergency Education Relief (GEER) Fund and Elementary, Secondary School Emergency Relief (ESSER) Fund Federal Grantor Name: U.S. Department of Education; Passed through California Department of Education Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) Education Stabilization Funds (ESF) may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by Education Department (ED) or the pass-through entity. In addition, with prior approval by the ED or the pass-through entity, recipients and subrecipients may use ESF funds to purchase real property and perform construction for improvements to land, buildings, or equipment that meet the overall purpose of the ESF program, which is ?to prevent, prepare for, and respond to? the COVID-19 pandemic. Condition: The Charter used funding from the Elementary and Secondary School Emergency Relief II (ESSER II) Fund program for one capital expenditure. The funding terms and conditions require the Charter to obtain approval from the funding agency prior to incurring the expenditure. The Charter was unable to provide documentation that the required approval was obtained. Cause: The error is a result of the Charter not understanding the terms and conditions of the requirements of the grant agreement. Effect: The effect of not obtaining the required approval resulted in a total of $90,000 in allowable ESF expenditures. Additionally, this error could result in potential loss of funding under this grant. Context: Due to new COVID-19 Emergency Acts Funding this fiscal year, the Charter was unaware this was a requirement for ESSER and GEER. Questioned Costs: The questioned cost is $90,000. Repeat Finding: This is not a repeat finding. Recommendation: We recommend the Charter develop and implement policies and procedures whereby staff obtain an understanding of the funding terms and conditions of all grants in order to prevent future violations of compliance requirements. We recommend the Charter develop and implement policies and procedures whereby staff obtain an understanding of the funding terms and conditions of all grants in order to prevent future violations of compliance requirements. Management should obtain proper training through the appropriate regulatory and granting agencies.
FINDING 2022-002: EDUCATION STABILIZATION FUND DISCRETIONARY GRANTS? EQUIPMENT AND REAL PROPERTY MANAGEMENT (50000 & 30000) CFDA Number and Title: 84.425 and 84.425C - Education Stabilization Fund Discretionary Grants: Governor's Emergency Education Relief (GEER) Fund and Elementary, Secondary School Emergency Relief (ESSER) Fund Federal Grantor Name: U.S. Department of Education; Passed through California Department of Education Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) Education Stabilization Funds (ESF) may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by Education Department (ED) or the pass-through entity. In addition, with prior approval by the ED or the pass-through entity, recipients and subrecipients may use ESF funds to purchase real property and perform construction for improvements to land, buildings, or equipment that meet the overall purpose of the ESF program, which is ?to prevent, prepare for, and respond to? the COVID-19 pandemic. Condition: The Charter used funding from the Elementary and Secondary School Emergency Relief II (ESSER II) Fund program for one capital expenditure. The funding terms and conditions require the Charter to obtain approval from the funding agency prior to incurring the expenditure. The Charter was unable to provide documentation that the required approval was obtained. Cause: The error is a result of the Charter not understanding the terms and conditions of the requirements of the grant agreement. Effect: The effect of not obtaining the required approval resulted in a total of $90,000 in allowable ESF expenditures. Additionally, this error could result in potential loss of funding under this grant. Context: Due to new COVID-19 Emergency Acts Funding this fiscal year, the Charter was unaware this was a requirement for ESSER and GEER. Questioned Costs: The questioned cost is $90,000. Repeat Finding: This is not a repeat finding. Recommendation: We recommend the Charter develop and implement policies and procedures whereby staff obtain an understanding of the funding terms and conditions of all grants in order to prevent future violations of compliance requirements. We recommend the Charter develop and implement policies and procedures whereby staff obtain an understanding of the funding terms and conditions of all grants in order to prevent future violations of compliance requirements. Management should obtain proper training through the appropriate regulatory and granting agencies.
FINDING 2022-002: EDUCATION STABILIZATION FUND DISCRETIONARY GRANTS? EQUIPMENT AND REAL PROPERTY MANAGEMENT (50000 & 30000) CFDA Number and Title: 84.425 and 84.425C - Education Stabilization Fund Discretionary Grants: Governor's Emergency Education Relief (GEER) Fund and Elementary, Secondary School Emergency Relief (ESSER) Fund Federal Grantor Name: U.S. Department of Education; Passed through California Department of Education Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) Education Stabilization Funds (ESF) may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by Education Department (ED) or the pass-through entity. In addition, with prior approval by the ED or the pass-through entity, recipients and subrecipients may use ESF funds to purchase real property and perform construction for improvements to land, buildings, or equipment that meet the overall purpose of the ESF program, which is ?to prevent, prepare for, and respond to? the COVID-19 pandemic. Condition: The Charter used funding from the Elementary and Secondary School Emergency Relief II (ESSER II) Fund program for one capital expenditure. The funding terms and conditions require the Charter to obtain approval from the funding agency prior to incurring the expenditure. The Charter was unable to provide documentation that the required approval was obtained. Cause: The error is a result of the Charter not understanding the terms and conditions of the requirements of the grant agreement. Effect: The effect of not obtaining the required approval resulted in a total of $90,000 in allowable ESF expenditures. Additionally, this error could result in potential loss of funding under this grant. Context: Due to new COVID-19 Emergency Acts Funding this fiscal year, the Charter was unaware this was a requirement for ESSER and GEER. Questioned Costs: The questioned cost is $90,000. Repeat Finding: This is not a repeat finding. Recommendation: We recommend the Charter develop and implement policies and procedures whereby staff obtain an understanding of the funding terms and conditions of all grants in order to prevent future violations of compliance requirements. We recommend the Charter develop and implement policies and procedures whereby staff obtain an understanding of the funding terms and conditions of all grants in order to prevent future violations of compliance requirements. Management should obtain proper training through the appropriate regulatory and granting agencies.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Material Weakness/Noncompliance Finding Number: 2022-001 Assistance Listing Number and Title: AL #84.425D COVID-19 ? Education Stabilization Fund Federal Award Identification Number / Year: 2022 Federal Agency: US Department of Education Compliance Requirement: Equipment Pass-Through Entity: Ohio Department of Education Repeat Finding from Prior Audit? No 2 CFR ? 3474.1 gives regulatory effect to the Department of Education for 2 CFR ? 200.313(c) through (d) which require that: (c) Equipment must be used in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award or, when appropriate, under other Federal awards; however, the non-Federal entity must not encumber the equipment without prior approval of the Federal awarding agency. (d) Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: 1. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. 2. A physical inventory of the property must be taken and the results reconciled with the property records at least once every 2 years. 3. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 4. Adequate maintenance procedures must be developed to keep the property in good condition. 5. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures), ESF funds may be used for these purposes. Recipients and subrecipients may use ESF funds to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. In addition, with prior approval by the ED or the pass-through entity, recipients and subrecipients may use ESF funds to purchase real property and perform construction for improvements to land, buildings, or equipment that meet the overall purpose of the ESF program, which is ?to prevent, prepare for, and respond to? the COVID-19 pandemic. In addition to the guidance noted above, the Uniform Guidance at 2 CFR ? 200.407 requires prior written approval from either the Department or the State (Governor or SEA, as applicable) for certain costs, such as the purchase of real property; equipment and other capital expenditures; entertainment costs; and travel costs. The School District failed to properly track assets purchased or improvements completed with ESF (specifically Elementary and Secondary School Emergency Relief or ESSER) funds in their Equipment Inventory System. This resulted in unrecorded assets of approximately $209,788 purchased with ESSER Funds not recorded in the inventory system. This would not allow for proper tracking as required above. This was the result of the School District Treasurer not adding all assets to the system. The School District also did not receive proper approval before the purchase of Phenomenal Aire Units. We recommend the School District Treasurer review the Equipment Inventory System and adjust it to include all assets purchased with ESSER Funds. We further recommend the School District ensure it receives all proper approvals as required for any capital asset expenditures purchased with ESSER funds. Officials? Response: Moving forward the School District Treasurer will make sure and double check all inventory purchased with ESSER Funds are in the inventory system if it is over the capital asset threshold. Also, she will make sure all capital asset expenditures purchased with ESSER funds have proper approval.
Material Weakness/Noncompliance Finding Number: 2022-001 Assistance Listing Number and Title: AL #84.425D COVID-19 ? Education Stabilization Fund Federal Award Identification Number / Year: 2022 Federal Agency: US Department of Education Compliance Requirement: Equipment Pass-Through Entity: Ohio Department of Education Repeat Finding from Prior Audit? No 2 CFR ? 3474.1 gives regulatory effect to the Department of Education for 2 CFR ? 200.313(c) through (d) which require that: (c) Equipment must be used in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award or, when appropriate, under other Federal awards; however, the non-Federal entity must not encumber the equipment without prior approval of the Federal awarding agency. (d) Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: 1. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. 2. A physical inventory of the property must be taken and the results reconciled with the property records at least once every 2 years. 3. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 4. Adequate maintenance procedures must be developed to keep the property in good condition. 5. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures), ESF funds may be used for these purposes. Recipients and subrecipients may use ESF funds to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. In addition, with prior approval by the ED or the pass-through entity, recipients and subrecipients may use ESF funds to purchase real property and perform construction for improvements to land, buildings, or equipment that meet the overall purpose of the ESF program, which is ?to prevent, prepare for, and respond to? the COVID-19 pandemic. In addition to the guidance noted above, the Uniform Guidance at 2 CFR ? 200.407 requires prior written approval from either the Department or the State (Governor or SEA, as applicable) for certain costs, such as the purchase of real property; equipment and other capital expenditures; entertainment costs; and travel costs. The School District failed to properly track assets purchased or improvements completed with ESF (specifically Elementary and Secondary School Emergency Relief or ESSER) funds in their Equipment Inventory System. This resulted in unrecorded assets of approximately $209,788 purchased with ESSER Funds not recorded in the inventory system. This would not allow for proper tracking as required above. This was the result of the School District Treasurer not adding all assets to the system. The School District also did not receive proper approval before the purchase of Phenomenal Aire Units. We recommend the School District Treasurer review the Equipment Inventory System and adjust it to include all assets purchased with ESSER Funds. We further recommend the School District ensure it receives all proper approvals as required for any capital asset expenditures purchased with ESSER funds. Officials? Response: Moving forward the School District Treasurer will make sure and double check all inventory purchased with ESSER Funds are in the inventory system if it is over the capital asset threshold. Also, she will make sure all capital asset expenditures purchased with ESSER funds have proper approval.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425U PASS-THROUGH NUMBER 6001 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 Criteria or specific requirement: Purchases of equipment and other capital expenditures require the written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of equipment purchases from the COVID-19 Education Stabilization Fund, we identified the purchase of 447 pieces of equipment with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. Retroactive approval was subsequently obtained from DESE during audit fieldwork. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $2,859,534 were paid from the COVID-19 Education Stabilization Fund. Questioned costs: The amount of questioned costs was $2,859,534. Context: We examined all capital expenditures of the COVID-19 Education Stabilization Fund totaling $4,660,482. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The District will continue to monitor internal controls in regards to use of ESSER funds and ensure all prior approvals are granted by DESE before purchasing of capital assets with a unit value equal to or greater than $5,000.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425U PASS-THROUGH NUMBER 6001 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 Criteria or specific requirement: Purchases of equipment and other capital expenditures require the written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of equipment purchases from the COVID-19 Education Stabilization Fund, we identified the purchase of 447 pieces of equipment with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. Retroactive approval was subsequently obtained from DESE during audit fieldwork. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $2,859,534 were paid from the COVID-19 Education Stabilization Fund. Questioned costs: The amount of questioned costs was $2,859,534. Context: We examined all capital expenditures of the COVID-19 Education Stabilization Fund totaling $4,660,482. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The District will continue to monitor internal controls in regards to use of ESSER funds and ensure all prior approvals are granted by DESE before purchasing of capital assets with a unit value equal to or greater than $5,000.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425U PASS-THROUGH NUMBER 6001 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 Criteria or specific requirement: Purchases of equipment and other capital expenditures require the written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of equipment purchases from the COVID-19 Education Stabilization Fund, we identified the purchase of 447 pieces of equipment with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. Retroactive approval was subsequently obtained from DESE during audit fieldwork. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $2,859,534 were paid from the COVID-19 Education Stabilization Fund. Questioned costs: The amount of questioned costs was $2,859,534. Context: We examined all capital expenditures of the COVID-19 Education Stabilization Fund totaling $4,660,482. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The District will continue to monitor internal controls in regards to use of ESSER funds and ensure all prior approvals are granted by DESE before purchasing of capital assets with a unit value equal to or greater than $5,000.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425U PASS-THROUGH NUMBER 6001 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 Criteria or specific requirement: Purchases of equipment and other capital expenditures require the written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of equipment purchases from the COVID-19 Education Stabilization Fund, we identified the purchase of 447 pieces of equipment with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. Retroactive approval was subsequently obtained from DESE during audit fieldwork. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $2,859,534 were paid from the COVID-19 Education Stabilization Fund. Questioned costs: The amount of questioned costs was $2,859,534. Context: We examined all capital expenditures of the COVID-19 Education Stabilization Fund totaling $4,660,482. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The District will continue to monitor internal controls in regards to use of ESSER funds and ensure all prior approvals are granted by DESE before purchasing of capital assets with a unit value equal to or greater than $5,000.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBERS 84.425D and 84.425U PASS-THROUGH NUMBER 6703 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 2022-001 - Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the written prior approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of equipment purchases from the COVID-19 Education Stabilization Fund, we identified the purchase of two pieces of equipment with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $19,403 were paid from the COVID-19 Education Stabilization Fund. Questioned costs: The amount of questioned costs was $19,403 Context: As a result of an examination of 3 checks (totaling $107,678) from a population of 40 checks (totaling $521,325), we identified 1 unauthorized purchase for 2 pieces of equipment totaling $19,403 that did not contain evidence of prior written approval from the pass-through agency. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The Horatio School District has received approval for all equipment greater than the $5000 threshold as required COM-22-047 since the purchase.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBERS 84.425D and 84.425U PASS-THROUGH NUMBER 6703 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 2022-001 - Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the written prior approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of equipment purchases from the COVID-19 Education Stabilization Fund, we identified the purchase of two pieces of equipment with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $19,403 were paid from the COVID-19 Education Stabilization Fund. Questioned costs: The amount of questioned costs was $19,403 Context: As a result of an examination of 3 checks (totaling $107,678) from a population of 40 checks (totaling $521,325), we identified 1 unauthorized purchase for 2 pieces of equipment totaling $19,403 that did not contain evidence of prior written approval from the pass-through agency. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The Horatio School District has received approval for all equipment greater than the $5000 threshold as required COM-22-047 since the purchase.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: ". . . 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 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 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: (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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and 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 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: ". . . 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 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 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: (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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and 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 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: ". . . 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 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 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: (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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and 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 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: ". . . 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 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 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: (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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and 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 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: ". . . 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 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 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: (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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and 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 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: ". . . 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 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 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: (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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and 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 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: ". . . 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 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 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: (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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and 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 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: ". . . 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 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 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: (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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and 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 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20/21, FY 21/22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2020-003. Condition and Context A sample of 40 vendor disbursements from the School Lunch fund was selected for testing to verify the transactions were for allowable activities and costs. There were 3 of the 40 transactions, totaling $4,129, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost of the food service program and were considered questioned costs. Due to the number and magnitude of exceptions, per auditor judgment, we concluded it would not be appropriate to examine the remaining 29 disbursements. Additionally, the School Corporation incurred costs in the amount of $49,365 paid from the School Lunch fund for a vehicle used to distribute meals to students at the Indiana Department of Education approved meal sites during the COVID-19 pandemic shutdown. The School Corporation could not provide supporting documentation that prior written approval was received from the pass-through entity. Finally, in fiscal year 2021-2022, the School Corporation paid a portion of the Assistant Superintendent of Schools salary from the School Lunch fund without supporting documentation to support the percentage paid. The Assistant Superintendent of Schools spent time on federal program and nonfederal program activities, but did not maintain documentation of time spent on each activity. The total paid to the Assistant Superintendent of Schools from the School Lunch fund without proper documentation was $29,753. The costs that were not properly documented were considered questioned costs. The lack of internal controls, availability of supporting documentation, and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.333 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass through entity in the case of a subrecipient. . . ." 2 CFR 200.334 (Revised Uniform Guidance) states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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: ". . . 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 200.439(b) states in part: "The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. . . ." 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: (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 Management had not established an effective system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and made available for audit with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect The failure to establish an effective system of internal controls and retain and provide supporting documentation prevented the determination of the School Corporation's compliance with the compliance requirements listed above. The failure to design and implement an effective system of internal controls enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $83,247 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and made available for audit and to comply with the grant agreement and 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.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION "COVID-19 - AMERICAN RESCUE PLAN - ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425U" PASS-THROUGH NUMBER 4602 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 2022-001. Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the prior written approval of the Federal awarding agency or pass-through entity, as specified in OMB 2 CFR section 200.439. Condition: During our examination of expenditures, we identified a facilities improvement purchase in which the District did not obtain prior written approval. Expenditures paid from the Education Stabilization Fund for this project totaled $218,614. Subsequent to audit discovery, the District obtained retroactive approval from the Arkansas Division of Elementary and Secondary Education. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $218,614 were paid from COVID-19-Education Stabilization Fund. Questioned costs: The amount of questioned costs was $218,614. Context: An examination of 11 checks (totaling $358,047) from a population of 17 capital improvements checks (totaling $380,220) revealed 8 checks (totaling $218,614) did not contain evidence of prior written approval from the pass-through agency. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: We have been in contact with DESE for guidance and will continue to do so regarding this fund. We will implement proper internal controls over program expenditures. Documentation has already been received from DESE to assist in this finding.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION "COVID-19 - AMERICAN RESCUE PLAN - ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425U" PASS-THROUGH NUMBER 4602 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 2022-001. Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the prior written approval of the Federal awarding agency or pass-through entity, as specified in OMB 2 CFR section 200.439. Condition: During our examination of expenditures, we identified a facilities improvement purchase in which the District did not obtain prior written approval. Expenditures paid from the Education Stabilization Fund for this project totaled $218,614. Subsequent to audit discovery, the District obtained retroactive approval from the Arkansas Division of Elementary and Secondary Education. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $218,614 were paid from COVID-19-Education Stabilization Fund. Questioned costs: The amount of questioned costs was $218,614. Context: An examination of 11 checks (totaling $358,047) from a population of 17 capital improvements checks (totaling $380,220) revealed 8 checks (totaling $218,614) did not contain evidence of prior written approval from the pass-through agency. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: We have been in contact with DESE for guidance and will continue to do so regarding this fund. We will implement proper internal controls over program expenditures. Documentation has already been received from DESE to assist in this finding.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBERS 84.425D AND 84.425U PASS-THROUGH NUMBER 4401 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 2022-001. Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the prior written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of expenditures from the COVID-19 Education Stabilization Fund, we identified seven equipment purchases with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. These purchases had a total cost of $148,687. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $148,687 were paid from the COVID-19 - Education Stabilization Fund. Questioned costs: The amount of questioned costs was $148,687. Context: We examined all capital expenditures of the COVID-19 - Education Stabilization Fund totaling $973,158. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: Initial guidance for utilizing ARP/ESSER purchasing practices from the state department was that only Facilities and Transportation purchases required prior approval. It was our understanding that the items which are listed in the finding would not fall in that category even though they exceeded $5,000 pre-approval guidance. The state department issued a memo (COM-22-047) that clarified this issue and we are working to ensure that our purchasing practices changed after this memo was issued.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBERS 84.425D AND 84.425U PASS-THROUGH NUMBER 4401 AUDIT PERIOD - YEAR ENDED JUNE 30, 2022 2022-001. Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the prior written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of expenditures from the COVID-19 Education Stabilization Fund, we identified seven equipment purchases with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education. These purchases had a total cost of $148,687. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $148,687 were paid from the COVID-19 - Education Stabilization Fund. Questioned costs: The amount of questioned costs was $148,687. Context: We examined all capital expenditures of the COVID-19 - Education Stabilization Fund totaling $973,158. Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: Initial guidance for utilizing ARP/ESSER purchasing practices from the state department was that only Facilities and Transportation purchases required prior approval. It was our understanding that the items which are listed in the finding would not fall in that category even though they exceeded $5,000 pre-approval guidance. The state department issued a memo (COM-22-047) that clarified this issue and we are working to ensure that our purchasing practices changed after this memo was issued.
Finding 2022-003: Equipment (50000)Assistance Listing No. 84.425 ? Education Stabilization Fund,Elementary and Secondary School Emergency Relief (ESSER) FundU.S. Department of EducationPassed through California Department of EducationCriteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity.Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326).Condition: The District made three expenditures above the capital threshold for federal purchases but did not obtain prior approval from the California Department of Education. Furthermore, the District was unable to provide documentation that federal wage rate requirements were included in the contracts.Question Costs: $66,608Context: These were the only capital purchases made from this federal program in the year under audit.Cause: The District was unaware of the requirements to obtain prior approval from CDE and to obtain federal wage rate data.Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency.Recommendation: We recommend that the District obtain prior approval from CDE and that contracts include federal wage rate requirements for all capital purchases from the Education Stabilization Fund.Views of Responsible Officials: The District will ensure it receives prior approval from CDE prior to making expenditures utilizing ESSER funds and will update its agreements to reflect the federal wage rate requirements when utilizing this funding.
Equipment/Real Property Management Head Start ALN# 93.600 US Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-02; 10CH011215-03; 10HE000901-01 Grant period – 2021 & 2022 Criteria – 2 CFR 200.439(d)(1) requires that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Condition – During testing it was noted that the Inventory tracking sheet did not contain all assets with federal interest under the Head Start program. It was also noted that there were items not included in the physical inventory observation taken. Cause – The Agency did not properly include all additions in the current year to the fixed asset schedule, which resulted in a lack of proper property records and missing physical inventory observation was made for assets included on properly records. Effect – Failure to include all items and take a full physical inventory observation could result in noncompliance with the grant agreements. Questioned Costs – Not applicable. Recommendation – We recommend the Agency follow its capital asset management policy to ensure all assets are adequately accounted for and properly safeguarded. CRI also recommends that the Agency include all of the information required by the Uniform Guidance in one central tracking spreadsheet or database. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Equipment/Real Property Management Head Start ALN# 93.600 US Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-02; 10CH011215-03; 10HE000901-01 Grant period – 2021 & 2022 Criteria – 2 CFR 200.439(d)(1) requires that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Condition – During testing it was noted that the Inventory tracking sheet did not contain all assets with federal interest under the Head Start program. It was also noted that there were items not included in the physical inventory observation taken. Cause – The Agency did not properly include all additions in the current year to the fixed asset schedule, which resulted in a lack of proper property records and missing physical inventory observation was made for assets included on properly records. Effect – Failure to include all items and take a full physical inventory observation could result in noncompliance with the grant agreements. Questioned Costs – Not applicable. Recommendation – We recommend the Agency follow its capital asset management policy to ensure all assets are adequately accounted for and properly safeguarded. CRI also recommends that the Agency include all of the information required by the Uniform Guidance in one central tracking spreadsheet or database. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.