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FINDING 2025-002 Subject: Child Nutrition Cluster - Allowable Costs/Costs Principles 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): FY 2023-2024, FY2024-2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters 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. The School Corporation's salary ordinance for classified staff reported the beginning wage rate and not the current wage rate. As a result, 11 of the 13 payroll disbursements sampled for classified employees did not agree with the School Corporation's salary ordinance, which totaled $714. This amount was considered questioned costs. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 16 MACONAQUAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 The School Corporation was not aware of the need for reporting the current wage rate within its salary ordinance. Effect Payroll disbursements for classified employees paid from the grant did not agree with the School Corporation's salary ordinance. As a result, known questioned costs of $714 were identified in the Condition and Context. Questioned Costs Known questioned costs of $714 were identified as described above in the Condition and Context. Recommendation We recommended that the School Corporation's management report the current wage rate within its salary ordinance and establish effective internal controls 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.