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FINDING 2025-001 Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024, FY2025 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, Reporting Audit Finding: Material Weakness Condition and Context An effective internal control system, which would include segregation of duties, was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the following compliance requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, and Reporting. Activities Allowed or Unallowed and Allowable Costs/Cost Principles There was not a documented oversight, review, or approval process in place over payrollrelated disbursements paid from the program-related School Lunch fund. The Treasurer approved a payroll summary report by fund; however, this report did not include payroll distribution information that would ensure the proper employees were being paid from the grant fund in the proper amounts. Eligibility There was not a documented oversight, review, or approval process in place to ensure the income guidelines entered into the point-of-sale system (Harmony) by the Food Service Director were accurate. Additionally, there was not a documented review process in place to ensure directly-certified eligible students were properly entered into Harmony. Reporting The Food Service Director prepared and submitted the sponsor claim reimbursement reports on a monthly basis without a documented oversight, review, or approval process in place to ensure their accuracy. The lack of internal controls were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 14 CLOVERDALE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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). . . ." Cause Management had not developed a system of internal controls that segregated key functions. Effect The lack of an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, and Reporting compliance requirements. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation strengthen its system of internal controls and document an oversight or review process over payroll distribution reports, Harmony inputs, and reimbursement request reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.