Finding Text
FINDING 2023-004
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 Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Condition and Context
A cash reimbursement is provided to the School Corporation based on meals served under the
School Breakfast Program, National School Lunch Program, and Summer Food Service Program for
Children. The cash reimbursement is to be used for the benefit of the food service program.
An effective system of internal controls, which would include segregation of duties, that would likely
be effective in preventing, or detecting and correcting, noncompliance should be designed and implemented
to ensure expenditures charged to the food service program fund (fund 800) are for the benefit of the food
service program. The School Corporation's process for payroll disbursements included a segregation of
duties; however, no individual reviewer or approver was provided detailed payroll information that would
have allowed them to determine the expense was being paid from the food service program.
Due to the lack of internal controls, the School Corporation paid $23,682 of administrative salaries
based on fixed percentages without supporting documentation to indicate how the percentages were
determined or time records indicating time spent on the program by the applicable administrators. The
amount paid, $23,682, is considered questioned costs.
INDIANA STATE BOARD OF ACCOUNTS 19
SHENANDOAH SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to the salaries identified 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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items. . . .
(g) Be adequately documented. . . ."
2 CFR 200.430 states in part:
"Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for
salaries and wages must be based on records that accurately reflect the work performed.
These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that
the charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-
Federal entity, not exceeding 100% of compensated activities . . .
(vii) Support the distribution of the employee's salary or wages among specific activities
or cost objectives if the employee works on more than one Federal award; a Federal award
and non-Federal award; an indirect cost activity and a direct cost activity; or two or more
indirect activities which are allocated using different allocation bases; or an unallowable
activity and a direct or indirect cost activity. . . ."
INDIANA STATE BOARD OF ACCOUNTS
20
SHENANDOAH SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management statements of what should be done to effect internal controls, and
procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, administrative payroll was charged to the school lunch fund without appropriate
supporting documentation.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of future federal funds to the School Corporation.
Questioned Costs
Known questioned costs of $23,682 were identified as noted in the Condition and Context.
Recommendation
We recommended the School Corporation's management establish a proper system of internal
controls and develop policies and procedures to ensure costs are adequately documented.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.