FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation entered into a cost reimbursement contract with a food service management company (FSMC). The FSMC incurred costs on behalf of the School Corporation and invoiced the School Corporation for reimbursement of those costs. INDIANA STATE BOARD OF ACCOUNTS 19 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had not designed or implemented a system of internal controls to ensure that program costs incurred by the FSMC were supported by proper documentation and were allowable prior to payment. Due to the lack of internal controls, the following errors were noted: In a test of 44 transactions, 22 transactions (50%) totaling $6,641 did not have proper documentation to support that the expenses were for the benefit of the food service program and in conformance with the cost principles. 1. Of the 5 transactions totaling $764, were for food and supply purchases paid for by the FSMC and then invoiced to the School Corporation for reimbursement. The vendor invoices supporting these purchases could not be provided for audit. 2. Of the 15 transactions totaling $5,532, were for FSMC employee payroll, fringe benefits, stipends, and other miscellaneous expenses. Proper supporting documentation could not be provided for audit for these transactions. 3. Of the 2 transactions, were determined to be unallowable expenses, as noted below: a. An Amazon purchase of $27 was for decorations that were shipped to a home residence. The FSMC stated the decorations were for a ceremony for the opening of the School Corporation's weight room. b. The FSMC purchased Visa gift cards totaling $318 that were gifted to FSMC staff. The items noted above were all considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 210.21(f)(1) states in part: ". . . (ii) (A) The contractor must separately identify for each cost submitted for payment to the school food authority the amount of that cost that is allowable (can be paid from the nonprofit school food service account) and the amount that is unallowable (cannot be paid from the nonprofit school food service account); or INDIANA STATE BOARD OF ACCOUNTS 20 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (B) The contractor must exclude all unallowable costs from its billing documents and certify that only allowable costs are submitted for payment and records have been established that maintain the visibility of unallowable costs, including directly associated costs in manner suitable for contract cost determination and verification. (iii) The contractor's determination of its allowable costs must be made in compliance with the applicable Departmental and Program regulations and Office of Management and Budget cost circulars; . . . (vi) The contractor must maintain documentation of costs and discounts, rebates and other applicable credits, and must furnish such documentation upon request to the school food authority, the State agency, or the Department." 7 CFR 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 200.445(a) states: "Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees." 2 CFR 200.467 states: "Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, required supporting documentation could be provided to verify costs paid to the FSMC were allowable and in conformance with the cost principles. In addition, unallowable costs were paid. INDIANA STATE BOARD OF ACCOUNTS 21 LAKE RIDGE SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $6,641 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all costs are adequately documented and for the benefit of the food service program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-001 ? Allowable Costs and Cost Principles: Significant Deficiency in Internal Control Over Compliance - See Schedule of Findings and Questioned Costs for chart/table. - Criteria ? 2 CFR 200.445 Goods or services for personal use ? The non-federal entity must adhere to certain principles establishing the allowability of items involved in determining cost. The following considerations must be made for goods or services for personal use: (a) Costs of goods or services for personal use of the non-federal entity?s employees are unallowable regardless of whether the cost is reported as taxable income to the employees. (b) Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances, and personal living expenses are only allowable as direct costs regardless of whether reported as taxable income to the employees. In addition, to be allowable direct costs must be approved in advance by a federal awarding agency. Condition/Context ? A sample of 73 costs totaling $184,495 charged to federal research and development grants were selected from the population of all costs charged to federal research and development grants during the year ended September 30, 2022. The sample was not statistically valid. One selected cost was a gift to a retiring employee who had worked on the federal grant. The cost was not allowable per the above federal regulation. Cause ? Due to turnover in certain positions, control procedures in place did not detect the unallowable cost. Effect ? An unallowable cost was charged to a federal grant. Since the grant was still open, management returned the amount to the federal government. Repeat finding ? This is not a repeat finding. Recommendation ? We recommend management provide training to employees who charge costs to federal grants and review costs charged to grants to ensure they are aware of the above and all pertinent cost principles. - View of responsible officials ? Management agrees with the auditor?s finding regarding detecting the $73 of unallowable cost. HMRI has control procedures in place to detect unallowable costs; however, due to turnovers within the organization, the insignificant amount of the unallowable cost was not detected. HMRI hired a new Grants Director on February 6, 2023, who along with the accounting team will ensure all costs are being charged to their respective federal revenue streams in accordance with the federal agreements and guidelines. The employees who charge costs to federal grants are aware that this is an unallowable cost. In addition, HMRI will conduct training to refresh and reinforce the guidelines with employees who charge costs to federal grants. The $73 unallowable cost was returned to NIH as the grant is still open.
FINDING 2022-001 ? Allowable Costs and Cost Principles: Significant Deficiency in Internal Control Over Compliance - See Schedule of Findings and Questioned Costs for chart/table. - Criteria ? 2 CFR 200.445 Goods or services for personal use ? The non-federal entity must adhere to certain principles establishing the allowability of items involved in determining cost. The following considerations must be made for goods or services for personal use: (a) Costs of goods or services for personal use of the non-federal entity?s employees are unallowable regardless of whether the cost is reported as taxable income to the employees. (b) Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances, and personal living expenses are only allowable as direct costs regardless of whether reported as taxable income to the employees. In addition, to be allowable direct costs must be approved in advance by a federal awarding agency. Condition/Context ? A sample of 73 costs totaling $184,495 charged to federal research and development grants were selected from the population of all costs charged to federal research and development grants during the year ended September 30, 2022. The sample was not statistically valid. One selected cost was a gift to a retiring employee who had worked on the federal grant. The cost was not allowable per the above federal regulation. Cause ? Due to turnover in certain positions, control procedures in place did not detect the unallowable cost. Effect ? An unallowable cost was charged to a federal grant. Since the grant was still open, management returned the amount to the federal government. Repeat finding ? This is not a repeat finding. Recommendation ? We recommend management provide training to employees who charge costs to federal grants and review costs charged to grants to ensure they are aware of the above and all pertinent cost principles. - View of responsible officials ? Management agrees with the auditor?s finding regarding detecting the $73 of unallowable cost. HMRI has control procedures in place to detect unallowable costs; however, due to turnovers within the organization, the insignificant amount of the unallowable cost was not detected. HMRI hired a new Grants Director on February 6, 2023, who along with the accounting team will ensure all costs are being charged to their respective federal revenue streams in accordance with the federal agreements and guidelines. The employees who charge costs to federal grants are aware that this is an unallowable cost. In addition, HMRI will conduct training to refresh and reinforce the guidelines with employees who charge costs to federal grants. The $73 unallowable cost was returned to NIH as the grant is still open.