Finding Text
Subject: Child Nutrition Cluster – Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
AL Numbers: 10.533, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award.
Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the allowable costs/cost principles compliance requirements.
Cause: After June 30, 2024, the School Corporation changed systems used to track time worked for the food service department and is unable to obtain archived records or time sheets to support the hours worked
by the food service department personnel. A system of internal controls was not in place to ensure there were appropriate records or audit trails to support time charged to the federal program.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were $19,714 of questioned costs identified.
Context: During the testing of internal controls over allowable costs/cost principles, the School Corporation had a system conversion for time entry during the audit period and did not retain copies of the adequate documentation to corroborate the hours worked for food service employees tested. The School Corporation was unable to provide timesheets or records supporting the number of hours charged by each employee for 35 of 35 selections related to hourly employees.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommend that the School Corporation's management establish an internal control process to ensure that detailed records are maintained and an audit trail is evident to comply with federal compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.