Finding 2022-5 No Prior Written Approval for Capital Disbursements in Excess of $10,000 Name of Federal Agency: Listing Award Number Number 64.033 13-ZZ-134 U. S. Department of Veterans Affairs (VA) Program Title VA Supportive Services for Veteran Families (SSVF) Criteria or specific requirement: 2 CFR 200.1 Definition for: Capital Expenditures means expenditures to acquire capital assets or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life. 14 THE ALSTON WILKES SOCIETY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2022 Section III - Federal Award Findings and Questioned Costs (continued) 2 CFR 200.452 Maintenance and repair costs states: Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements that add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see § 200.439). These costs are only allowable to the extent not paid through rental or other agreements. 2 CFR 200.439 Equipment and Other Capital Expenditures, (b) (1-3) 1 Capital expenditures for general purpose equipment, buildings, and land are allowable as direct costs, but only with the prior written approval of the Federal agency or pass-through entity. 2 Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $10,000 or more have the prior written approval of the Federal agency or pass-through entity, and 3 Capital expenditures for improvements to land, buildings, or equipment that materially increase their value or useful life are allowable as a direct cost, but only with the prior written approval of the Federal agency or pass-through entity. Condition: We identified two transactions where the Society should have received prior written approval from the awarding agency, before incurring the costs. The transactions, in the amounts of $26,057 and $18,000, were recorded as equipment maintenance expense, and floor repairs, respectively. In accordance 2 CFR 200.439 b, it appears the cost should have had prior written approval. Cause of condition: The reason the condition occurred appears to be the lack of a thorough understanding of the cost principles under the Uniform Guidance (2 CFR Part 200, Subpart E - Cost Principles). Potential effect of condition: The possible effect of this condition is non-compliance with prior written approval requirements for disbursements totaling $44,057.51. Section III - Federal Award Findings and Questioned Costs (continued) Questioned Costs: This condition resulted in questioned costs totaling $44,057.51. The questioned cost amount was computed by adding the total of the two sample items tested for this condition, as shown below: Sample # Description 28 Floor Repairs 29 Equipment Maintenance Amount $18,000.00 26,057.51 $ 44,057.51 Prevalence and Consequence: A judgmental sample of 40 disbursements totaling $134,400.16 was selected. Out of the 40 sample items tested, two were identified where prior written approval was not obtained, totaling $44,057.51. Repeat Finding: No Recommendation: We recommend management ensure accounting personnel responsible for the administration of funds related to award programs, refamiliarize themselves with 2 CFR 200 Subpart E - Cost Principles, to enable them to recognize when prior written approval is required, and when to capitalize certain capital expenditures when the federal criteria are met for nongovernmental entities.
Finding 2022-5 No Prior Written Approval for Capital Disbursements in Excess of $10,000 Name of Federal Agency: Listing Award Number Number 64.033 13-ZZ-134 U. S. Department of Veterans Affairs (VA) Program Title VA Supportive Services for Veteran Families (SSVF) Criteria or specific requirement: 2 CFR 200.1 Definition for: Capital Expenditures means expenditures to acquire capital assets or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life. 14 THE ALSTON WILKES SOCIETY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2022 Section III - Federal Award Findings and Questioned Costs (continued) 2 CFR 200.452 Maintenance and repair costs states: Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements that add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see § 200.439). These costs are only allowable to the extent not paid through rental or other agreements. 2 CFR 200.439 Equipment and Other Capital Expenditures, (b) (1-3) 1 Capital expenditures for general purpose equipment, buildings, and land are allowable as direct costs, but only with the prior written approval of the Federal agency or pass-through entity. 2 Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $10,000 or more have the prior written approval of the Federal agency or pass-through entity, and 3 Capital expenditures for improvements to land, buildings, or equipment that materially increase their value or useful life are allowable as a direct cost, but only with the prior written approval of the Federal agency or pass-through entity. Condition: We identified two transactions where the Society should have received prior written approval from the awarding agency, before incurring the costs. The transactions, in the amounts of $26,057 and $18,000, were recorded as equipment maintenance expense, and floor repairs, respectively. In accordance 2 CFR 200.439 b, it appears the cost should have had prior written approval. Cause of condition: The reason the condition occurred appears to be the lack of a thorough understanding of the cost principles under the Uniform Guidance (2 CFR Part 200, Subpart E - Cost Principles). Potential effect of condition: The possible effect of this condition is non-compliance with prior written approval requirements for disbursements totaling $44,057.51. Section III - Federal Award Findings and Questioned Costs (continued) Questioned Costs: This condition resulted in questioned costs totaling $44,057.51. The questioned cost amount was computed by adding the total of the two sample items tested for this condition, as shown below: Sample # Description 28 Floor Repairs 29 Equipment Maintenance Amount $18,000.00 26,057.51 $ 44,057.51 Prevalence and Consequence: A judgmental sample of 40 disbursements totaling $134,400.16 was selected. Out of the 40 sample items tested, two were identified where prior written approval was not obtained, totaling $44,057.51. Repeat Finding: No Recommendation: We recommend management ensure accounting personnel responsible for the administration of funds related to award programs, refamiliarize themselves with 2 CFR 200 Subpart E - Cost Principles, to enable them to recognize when prior written approval is required, and when to capitalize certain capital expenditures when the federal criteria are met for nongovernmental entities.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 20-21, FY 21-22 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. During the audit period, the School Corporation made one transfer from the Foodservice fund (School Lunch fund). The transfer was related to a completed remodeling project on the cafeteria and kitchen at the middle school. Expenses for the remodeling project were initially paid from Fund 160 (Operating). However, on April 30, 2022, the School Corporation made a transfer in the amount of $300,000 from Fund 800 (School Lunch) to Fund 160 to cover a portion of the remodeling project expenses. Based on inquiry of the School Corporation, the original intent was for the project to paid jointly from the School Lunch fund and the Operating fund, with the School Lunch fund covering only equipment related expenditures. Documentation could not be provided to support this understanding, nor to show permission from the grantor agency, as required, to pay for a remodeling project from School Lunch funds. While price quotes for the equipment were provided, no additional supporting documentation, including invoices, of the expenditures paid could be provided. The above noted transfer was considered a questioned cost. The lack of internal controls and noncompliance were isolated to the transfer of funds described above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.452 states: "Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see ? 200.439). These costs are only allowable to the extent not paid through rental or other agreements." 2 CFR 200.407 states in part: "Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of this part: . . . (l) ? 200.439 Equipment and other capital expenditures; . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ? 210.19(a) of this part. . . ." The USDA Food and Nutrition Service Guidance for State Agencies & School Food Authorities, page 16, states in part: ". . . Renovating a School Kitchen 2 CFR 200.452 (see below), Maintenance and repair costs, identifies costs of normal repairs and alterations as allowable so long as they: (1) keep property in an efficient operating condition; (2) do not add to the permanent value of the property or appreciably prolong its intended life; and (3) are not otherwise included in rental or other agreements. Based on these principles, FNS has allowed limited renovations within the inside perimeter of a kitchen/cafeteria space with the required prior State agency approval (2 CFR 200.407 or FNS approval (7 CFR 210.14(a)) . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 21 BEECH GROVE CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Special Tests and Provisions - School Food Accounts compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Questioned costs were identified in the amount of $300,000 as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Special Tests and Provisions - School Food Accounts compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.