Finding Text
FINDING 2024-003
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Number and Year (or Other Identifying Number): FY23
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-003.
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 Allowable Costs/Cost Principles compliance
requirement; however, it was not effective.
The School Corporation was approved for an indirect cost rate for fiscal year 2021-2022 in order to
allocate indirect costs to the School Corporation's Cafeteria fund. However, the School Corporation did not
charge these indirect costs within the appropriate time frame. Indirect costs for 2021-2022 in the amount
of $26,793 was not charged to the Cafeteria fund until September 2022. Per USDA guidance, it is
unallowable to bill the National School Food Service Account (NSFSA) for indirect costs that were paid from
the general fund in prior years unless an agreement exists to show that the district had been "loaning" the
NSFSA funds to cover the indirect costs in one or more prior years. The School Corporation did not have
an interfund loan agreement in place. Therefore, the amounts were considered questioned costs.
The lack of effective internal controls and noncompliance were isolated to the indirect costs noted
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). . . ."
USDA Indirect Costs, Guidance for State Agencies & School Food Authorities states in part:
". . . It is unallowable to bill the NSFSA for indirect costs that were paid from the general fund
in prior years unless an agreement exists to sow that the district had been 'loaning' the NSFSA
funds to cover the indirect costs in one or more prior years. . . . There is no Federal requirement
that prohibits an SFA from charging its internal fiscal policy regarding the recovery of indirect
costs by those organizational units within the SFA that actually incur costs. Absent a
documented 'inter-fund loan' as outlined above, however, an SFA may only change its policy
to charge the NSFSA for indirect costs prospectively (that is going forward for the next school
year.)
It is unallowable to bill the NSFSA for indirect costs that were previously paid from the general
fund unless an agreement exists to show that the district had been 'loaning' the NSFSA funds
to cover the indirect costs in one or more prior years. . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items. . . .
(g) Be adequately documented. . . ."
Cause
Management was not aware of the requirements before the transfer was made in September 2022.
Effect
The failure to establish an effective system of internal controls enabled noncompliance to go undetected
and resulted in the School Corporation charging indirect costs that were not allowable.
Questioned Costs
Known questioned costs of $26,793 were identified as noted in the Condition and Context.
Recommendation
Management of the School Corporation should develop written policies and procedures to ensure
that indirect costs are properly determined and paid in the appropriate fiscal year.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.