Finding 1103189 (2024-003)

Department of Education and Passed through State of Iowa Department of Education Federal Financial Assistance Listing #84.287, C14-SHIP, C15-SHIP, C16-SHIP, C17-SHIP, C18-SHIP, 7/1/2023 – 6/30/2024 Twenty-First Century Community Learning Centers Program Activities Allowed or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance Criteria: The Organization is required to have procedures in place to ensure that federal awards are expended only for allowable costs in accordance with Subpart E – Cost Principles of the Uniform Guidance. Allowable costs are supported by appropriate documentation and correctly charged as to account, amount, and period. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Iowa Department of Education Guide to Program Budgets and Accounting for the 21st Century Community Learning Centers program provides that an organization participating in the program may expend no more than 8 percent of annual funding on general administration and indirect costs. Further, indirect costs are to be recovered only to the extent of direct costs incurred. Condition: Through review of indirect costs charged to the federal awards, we noted the Organization charged an 8% administrative indirect cost rate to the federal awards, however, calculated the 8% on the budgeted grant award rather than on the actual direct costs incurred under the federal award for the first three quarters of the grant period. Cause: The Organization was not aware that the indirect cost rate should be applied pro rata to the underlying direct costs prior to the completion of the prior year audit. Effect: The Organization’s controls did not detect or correct the errors identified. Questioned Costs: No questioned costs over $25,000. Context: Two quarters out of four quarters of indirect costs charged to the federal awards were selected for testing, which accounted for $17,547 of $44,268 total indirect costs charged to the federal award. Repeat Finding from Prior Year: Yes, Finding 2023-003 Recommendation: We acknowledge the Organization revised their procedures following the prior year audit. We recommend management continue to review procedures over the allocation of indirect costs to ensure indirect amounts charged to the program are based on actual underlying direct costs and that the total indirect allocation of general administration costs does not exceed the rate allowed by the federal program. Views of Responsible Officials: Management is in agreement.